International Arbitration 2019 Comparisons

Last Updated August 19, 2019

Contributed By Clifford Chance

Law and Practice

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Clifford Chance is one of the world's leading law firms, combining the highest global standards with specialised local expertise. The firm has over 3,200 legal advisors in 32 offices across 21 countries. Clifford Chance focuses on providing unrivalled service in each area of interest in the commercial sector including banking and finance, corporate and M&A, real estate and construction, litigation and dispute resolution, tax, financial regulation and capital markets. Clifford Chance CIS Limited was established in Moscow in 1991 and is one of the leading international law firms in Russia served by approximately 60 lawyers, including seven partners.

The popularity of international arbitration as a means of resolving commercial disputes is growing slowly but steadily among Russian parties. Russian parties tend to choose international arbitration for resolving disputes arising out of high-value and complex cross-border contracts, which Russian courts may not always be well-equipped to resolve.

Following the Russian arbitration law reform of late 2015, arbitral institutions are now required to obtain the status of a 'permanent arbitral institution' (PAI) in order to be able, among other things, to administer arbitration of certain types of 'conditionally arbitrable' corporate disputes involving shares in Russian companies. This requirement applies to foreign arbitral institutions as well. Until recently there were only four arbitral institutions – all of them Russian – which had been conferred the status of PAI. In April 2019, the Hong Kong International Arbitration Centre (HKIAC) became the first foreign arbitral tribunal to obtain PAI status in Russia. In June 2019, the Vienna International Arbitration Centre also received a recommendation to be included on the list of PAIs. However, commercial parties may still feel restricted in their choice of arbitral institutions that can administer arbitration of corporate disputes.

Most disputes submitted to international commercial arbitration in Russia arise out of supply contracts. International arbitration is also often used in construction, oil and gas, banking and finance, leasing, etc. International arbitration is most prevalent in industries that involve high-value and complex cross-border contracts requiring knowledge and expertise on the part of the persons entrusted to resolve disputes arising out of them. In addition, given that parties tend to choose foreign law to govern such contracts, they naturally derogate from submitting disputes arising out of them to Russian state courts, which may not always be well-equipped to interpret and apply foreign law.

To date, only six arbitral institutions have obtained PAI status: the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (the ICAC), the Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation (MAC), the Arbitration Centre at the Russian Union of Industrialists and Entrepreneurs, the Russian Arbitration Centre at the Russian Institute of Modern Arbitration, the National Centre for Sports Arbitration at the Sports Arbitration Chamber, and the HKIAC. Of these, the ICAC is the most popular choice for administering international arbitrations seated in Russia due to its long history and international repute.

On 18 June 2019, the Council for the Advancement of Arbitration at the Russian Ministry of Justice recommended that Vienna International Arbitral Centre be vested with the power to function as a PAI. It is expected to be conferred the status of a PAI soon.

The International Court of Arbitration of the International Chamber of Commerce, the London Court of International Arbitration, and the Arbitration Institute of the Stockholm Chamber of Commerce are occasionally chosen for administering international arbitrations seated in Russia, despite the fact that none of them has the status of a PAI. Arbitral awards rendered by tribunals constituted under the rules of these institutions can be recognised and enforced in Russia.

International arbitrations seated in Russia are primarily governed by Law No 5338-1 of 7 July 1993 On International Commercial Arbitration (the ICA Law). In addition, in certain respects not expressly regulated by the ICA Law – such as operation of PAIs in Russia, requirements applicable to arbitrators and their liability, etc – international arbitration is also governed by certain provisions of Federal Law No 382–FZ of 29 December 2015 On Arbitration in the Russian Federation (the RF Arbitration Law). The procedures for annulment and recognition and enforcement of arbitral awards in Russia are also governed by the Civil Procedure Code of the Russian Federation (Federal Law No 138-FZ of 14 November 2002) (the CPC) and the Arbitrazh Procedure Code of the Russian Federation (Federal Law No 95-FZ of 24 July 2002) (the APC).

Please note: the term 'arbitrazh' is used throughout to refer to Russian state commercial courts.

Divergence from the UNCITRAL Model Law

The ICA Law is based on the UNCITRAL Model Law (as amended in 2006), although it does diverge from it in some respects, including the following:

  • under the ICA Law, express agreement of the parties that the subject matter of the arbitration agreement relates to more than one country does not in itself render an arbitration an 'international' arbitration regulated by the ICA Law (see Article 1(c) of the UNCITRAL Model Law);
  • Article 7 of the ICA Law not only adopts, but goes beyond the wording of Option 1 of Article 7 suggested in the UNCITRAL Model Law by providing for arbitration-friendly rules of interpreting arbitration agreements etc;
  • Article 17 of the ICA Law does not contain detailed regulation of interim measures (see Article 17 of the UNCITRAL Model Law);
  • Article 28 of the ICA Law is silent as to the power of the arbitral tribunal to resolve disputes ex aequo et bono or as 'amiable compositeur'.

Russian arbitration legislation underwent significant changes in late 2015 as a result of comprehensive reform. Federal Law No 531-FZ of 27 December 2018 introduced further amendments to the updated regulatory framework for arbitration in Russia, which took effect on 29 March 2019. Among other things, there have been changes to:

  • the rules on obtaining authorisation to administer arbitration as a PAI;
  • the requirements on arbitration clauses governing disputes arising out of corporate agreements and legal action brought by the participants of a company in the company's interests; and
  • the rules on the arbitrability of disputes arising out of contracts entered into under or in connection with Federal Law No 223-FZ of 18 July 2011 On Procurements of Goods, Works and Services by Certain Types of Legal Entities.

Generally, in order to be enforceable in Russia an arbitration agreement must be made in writing and expressly stipulate:

  • that disputes are to be submitted to arbitration;
  • the legal relationships and the disputes arising out of those relationships which are to be submitted to arbitration;
  • the arbitral institution that is to administer resolution of such disputes or refer to ad hoc arbitration.

The CPC and the APC specify certain categories of cases that cannot be referred to arbitration, including bankruptcy, administrative and certain corporate disputes as well as family, employment, probate and privatisation matters, etc.

Generally, arbitrability depends on whether a dispute arises out of a civil/commercial legal relationship or a public legal relationship. Disputes arising out of civil/commercial legal relationships that also involve a public element are often in the 'grey zone'.

Please also see 5.1 Matters Excluded from Arbitration, below.

Generally, the ICA Law requires that, in case of any doubt, an arbitration agreement shall be construed in favour of its validity and enforceability.

However, the approach of Russian courts to the enforcement of arbitration agreements is not always predictable. In a recent case the Russian courts found the Standard ICC Arbitration Clause to be unenforceable because it did not refer to "the specific institution that would resolve the dispute". Later, the Presidium of the Russian Supreme Court issued a digest of case law disagreeing with this position and finding that "[a]n arbitration clause between the parties to a contract which conforms to an arbitration clause recommended by the arbitral institution chosen by the parties is enforceable".

An arbitration clause is severable from the rest of the contractual provisions, meaning that its validity does not depend on the validity of the remainder of the contract.

The ICA Law recognises the rule of separability. Where a contract is found invalid, this does not automatically render invalid the arbitration clause contained in it. However, occasionally, the grounds for the invalidity of the contract itself and of the arbitration clause may overlap (eg, if it is proved that the entire contract, including the arbitration clause, has been falsified).

Under the RF Arbitration Law, an arbitrator must:

  • be at least 25 years of age and have full legal capacity;
  • have no unexpired or unexpunged convictions;
  • not be a person whose status as a state court judge, attorney, notary, investigator, prosecutor or other law enforcement official has previously been revoked in Russia for malpractice or abuse of authority;
  • not be a person who cannot serve as an arbitrator due to the status ascribed to him/her by federal law.

A sole arbitrator must hold a degree in law, unless agreed otherwise by the parties.

The chairperson of a tribunal is also required also hold a degree in law; however, the parties can agree to waive this requirement, provided that at least one of the other members of the tribunal holds a degree in law.

The parties can agree on additional requirements that are applicable to arbitrators, including their qualifications.

It is not entirely clear whether these requirements limit the parties' autonomy to select arbitrators in international arbitrations.

Article 11 of the ICA Law establishes the default procedures applicable in case of:

  • failure by the parties to choose the method of selecting arbitrators –
    1. if a dispute is to be resolved by three arbitrators, each party must appoint one arbitrator, and then the two arbitrators so appointed are to appoint the third; should either party fail to appoint an arbitrator within 30 days following receipt of a relevant request from the other party, or should two arbitrators fail to agree on appointment of the third arbitrator within 30 days following their appointment, all appointments are to be made by a competent court upon application of either party; and
    2. if a dispute is to be resolved by a sole arbitrator and the parties fail to agree on his selection, the appointment is to be made by a competent court upon application of either party;
  • failure of the parties' chosen method for selecting arbitrators –
    1. if one of the parties fails to comply with the agreed selection/appointment procedure; or
    2. if the parties or two arbitrators cannot reach agreement in accordance with the selection/appointment procedure; or
    3. if the third party, including the PAI, fails to perform any functions required of it under such procedure;
  • either party may request a competent court to take the necessary measures, subject to the procedure agreed by the parties (unless such agreement stipulates alternative methods for the selection/appointment of arbitrators).

A court can intervene in the selection of arbitrators in the cases referred to in the response to 4.2 Default Procedures, above.

As a rule, court intervention is limited to the instances specifically provided in the ICA Law.

When appointing an arbitrator, a court must take into account any requirements on arbitrators specified in the arbitration agreement, as well as considerations that will ensure the appointment of an independent and impartial arbitrator.

If an arbitration agreement provides for administration of arbitration by a PAI, the parties to that agreement can expressly exclude court intervention. In such cases failure of the parties' chosen method for selecting arbitrators terminates the arbitration process and the dispute may be referred to court.

The ICA Law contains particular provisions governing the challenge/removal of arbitrators.

Grounds for challenging an arbitrator include:

  • reasonable doubts as to the arbitrator's impartiality or independence; and
  • the arbitrator's failure to meet the requirements stipulated by law or the parties' agreement.

A party can challenge an arbitrator who has been appointed by or with the participation of that party only based on grounds that come to light after such appointment.

Grounds for removal of an arbitrator include:

  • legal or factual inability of the arbitrator to participate in dispute resolution; and
  • the arbitrator's failure to participate in dispute resolution for an unreasonably long period of time.

The ICA Law requires arbitrators to be independent and impartial, without defining these requirements. Compliance with a standard of impartiality and independence assumes that:

  • a person approached in connection with his/her potential appointment as an arbitrator must give notice of any circumstances that could raise reasonable doubts as to his/her impartiality or independence; and
  • should any such circumstances arise after his/her appointment or in the course of arbitral proceedings, the arbitrator must immediately notify the parties to the proceedings.

The arbitration rules of PAIs must contain provisions on (ensuring) the impartiality and independence of arbitrators.

As mentioned in 3.2 Arbitrability, above, Russian law establishes certain categories of disputes that cannot be referred to arbitration.

Article 33(2) of the APC excludes the following matters from arbitration:

  • bankruptcy cases;
  • disputes related to refusal by public officials to register a legal entity or an individual entrepreneur;
  • certain IP-related disputes;
  • disputes arising out of administrative/public relations;
  • disputes requiring the issuance of declaratory judgments establishing legal facts;
  • disputes over compensation for violation of the right to trial within a reasonable time;
  • disputes related to defending the rights and interests of groups of persons;
  • certain corporate disputes (eg, compulsory offers to purchase shares, exclusion of participants from legal entities, etc);
  • disputes related to privatisation of state and municipal property;
  • disputes arising out of public procurement contracts;
  • disputes related to compensation of harm to the environment;
  • other cases expressly provided by federal law.

Article 22.1(2) of the CPC excludes the following matters from arbitration:

  • cases subject to special procedures under the CPC (eg, adoption, emancipation, etc);
  • family matters;
  • employment matters;
  • inheritance matters;
  • disputes related to privatisation of state and municipal property;
  • disputes arising out of public procurement contracts;
  • disputes related to death or personal injury;
  • disputes related to eviction of persons from their dwellings;
  • disputes related to compensation of harm to the environment;
  • other cases expressly provided by federal law.

Additionally, there are corporate disputes which are arbitrable, provided the invoked arbitration clause satisfies certain conditions listed in law. Among these corporate disputes are, among others:

  • disputes associated with shareholder agreements relating to the management of a legal entity, including disputes arising out of corporate agreements;
  • disputes involving claims of participants of a legal entity seeking compensation of losses, invalidation of transactions performed by the legal entity, and application of the consequences of their invalidity;
  • disputes associated with the ownership of shares or participation interests in Russian companies, the establishment of encumbrances over them and the exercise of the rights conferred by them (including, among other things, disputes associated with agreements on sale and purchase of shares or participation interests).

As follows from Russian case law, courts also have the authority to "uphold public policy" and the power to deny recognition and enforcement of arbitral awards upon finding "such an element of public policy [of the Russian Federation] as the non-arbitrability of the dispute" in relation to which the arbitral award has been rendered or "infringements of other elements of public policy". Such elements of public policy include: the holding of property by public law entities; relations in the sphere of bankruptcy, public procurement, fair competition, conservatorship and guardianship; and "expenditure of budgetary resources".

An arbitral tribunal may rule on a party's challenge to its own jurisdiction, including any objections to the existence and validity of the arbitration agreement. A plea that the arbitral tribunal does not have jurisdiction must be raised not later than the first submission on the merits. The arbitral tribunal can rule on a plea of lack of jurisdiction either as a preliminary question or in the award on the merits.

Where an arbitral tribunal dismisses a party's challenge to its own jurisdiction in a separate preliminary ruling, either party can file an application with a competent court challenging the jurisdiction of the tribunal. Should an arbitral tribunal allow a party's challenge, the tribunal's decision is final and not subject to appeal.

Referring the question of an arbitral tribunal's jurisdiction to court does not prevent the tribunal from continuing arbitration and rendering an award.

If an arbitration agreement provides for administration of arbitration by a PAI, the parties to the agreement can expressly exclude the involvement of a competent court.

If the arbitral tribunal rules on its jurisdiction as a preliminary question, a party may go to court to challenge the jurisdiction of the tribunal up to one month after having been notified of the ruling.

The standard of judicial review for challenging an arbitral tribunal's jurisdiction is not clear-cut. However, in any event courts cannot reassess the facts of a case established by a tribunal, to the extent such facts are relevant for determining whether the tribunal has jurisdiction or not.

A court, when seized of an action in a matter in respect of which the parties have made an arbitration agreement, must upon application of one of the parties leave the claim without consideration (ie, terminate the proceedings without prejudice), unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

Under the CPC and the APC, Russian courts must decline to consider claims submitted in breach of an arbitration agreement if either of the parties raises an objection on this ground not later than in the first submission on the merits, unless, as noted above, the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

In principle, an arbitration agreement extends only to the entities that are parties to it and does not extend to third parties.

Unless the parties agree otherwise, an arbitral tribunal upon request of either party may grant interim relief which it deems necessary. Russian law does not specify the types of relief that are available. Article 17 of the ICA Law states that any rulings and procedural acts of an arbitral tribunal regarding interim measures are binding upon the parties. Any such interim relief will not be enforceable in the Russian courts. However, the President of the MAC has the power to issue a ruling seizing a party's vessel or cargo located at a Russian sea port to secure a maritime claim, and such rulings are subject to execution.

Under Article 9 of the ICA Law, a party may request interim measures from a competent court in advance of or during the course of arbitral proceedings. The general mechanism for obtaining interim relief in advance of arbitral proceedings is set out only in the APC.

The court having effective jurisdiction (eg, at the place of the debtor's residence or location or at the place where the debtor's property is located) can grant interim relief in aid of foreign-seated arbitrations.

Russian law defines interim relief as urgent temporary measures granted to secure the claimant's claim or proprietary interests. Arbitrazh courts may grant such interim relief as (i) attachment of the respondent's accounts or seizure of other assets, (ii) injunctions barring the respondent or other persons from taking certain actions in respect of the subject matter of the dispute, (iii) orders to perform certain actions to prevent damage to disputed property, etc (this list is not exhaustive).

Under Russian law, the parties may agree (including by referring to the applicable arbitration rules) that a PAI may order interim measures it deems necessary in advance of constitution of the tribunal.

Article 17 of the ICA Law contains broad language on the powers of the arbitral tribunal to order interim measures and does not exclude the possibility of ordering security for costs.

The parties are free to agree on the arbitral procedure, subject to the requirements of the ICA Law and the RF Arbitration Law. In the absence of such an agreement, the arbitral tribunal may conduct arbitration as it deems appropriate.

Russian law does not require the parties to take any particular steps in arbitration proceedings. However, Article 21 of the ICA Law provides that unless agreed otherwise by the parties, arbitration is deemed commenced on the day the respondent receives the claim. In addition, unless the parties agree on the content of their written submissions to a different effect, Article 23 of the ICA Law requires (i) the claimant to prove the facts supporting its claim and the disputed issues, and set out the relief it is seeking, and (ii) the respondent to submit its defence.

The ICA Law provides arbitrators with the power to:

  • rule on their own competence (Article 16 of the ICA Law);
  • grant any interim relief they deem appropriate, unless agreed otherwise by the parties (Article 17 of the ICA Law);
  • conduct the arbitration in the manner deemed appropriate by the arbitrators, subject to the requirements of the ICA Law and the RF Arbitration Law and unless agreed otherwise by the parties (Article 19 of the ICA Law);
  • terminate the arbitration if the claimant fails to submit a statement of claim satisfying the requirements of Article 23 of the ICA Law, unless agreed otherwise by the parties (Article 25 of the ICA Law);
  • continue proceedings and render an award on the basis of the evidence presented if in the absence of any valid reason (i) the respondent fails to submit a statement of defence or (ii) any party fails to appear at the hearings or present documentary evidence, unless agreed otherwise by the parties (Article 25 of the ICA Law);
  • appoint experts and require the parties to provide an expert with any information, goods or other property relevant to the case, unless agreed otherwise by the parties (Article 26(1) of the ICA Law);
  • request assistance from a competent Russian court in collecting evidence, if arbitration is administered by a PAI (Article 27 of the ICA Law).

The ICA Law imposes the duty upon arbitrators to:

  • remain impartial and independent throughout the arbitration and disclose any circumstances likely to give rise to reasonable doubts as to their impartiality or independence (Article 12 of the ICA Law);
  • treat the parties equally and ensure they are given a full opportunity to present their cases (Article 18 of the ICA Law);
  • decide the dispute in accordance with the rules of law chosen by the parties as being applicable to the matter in dispute, and failing any designation by the parties, to apply the law determined by the conflict of laws rules they determine to be applicable – in all cases, arbitrators shall resolve disputes in accordance with the terms of the relevant contract and taking into account the trade usages applicable to the contract (Article 28 of the ICA Law);
  • render an award in writing and set out the reasons upon which it is based (Article 31 of the ICA Law);
  • correct any errors in an award, issue an interpretation of a specific point or part of an award, or issue an additional award upon request of either party, where the respective request is justified (Article 33 of the ICA Law).

The RF Arbitration Law provides that where a statement of claim is signed by a legal representative, a power of attorney or other document confirming his/her authority must be enclosed together with the statement of claim. There is no such explicit requirement in the ICA Law.

As a matter of Russian law, a person duly empowered under a power of attorney can act as a party's legal representative in an arbitration seated in Russia without being admitted to the Russian Bar. The same applies to party representation in Russian court proceedings related to arbitration.

Under Federal Law No 63-FZ of 31 May 2002 On Advocate's Activities and Advocacy in the Russian Federation, advocates who have qualified abroad may provide legal aid in the territory of the Russian Federation, including with respect to international arbitration, only on matters of foreign law. Moreover, advocates qualified abroad must be registered with the Ministry of Justice to act as advocates in Russia. In practice, appearing at the arbitral hearings in Russia does not pose problems to foreign-qualified legal representatives.

Pursuant to Article 19(2) of the ICA Law, unless agreed otherwise by the parties, an arbitral tribunal is empowered to determine the admissibility, relevance and weight of any evidence. The general approach is that each party shall prove all factual circumstances it invokes in support of its claim or defence. However, Russian law does not prescribe any specific rules applicable to discovery, disclosure, privilege, use of witness statements or cross-examination in international arbitration.

The rules applicable to the collection and submission of evidence are agreed by the parties to arbitration either explicitly or by incorporation of the relevant arbitration rules into the parties' arbitration agreement.

Overall, the rules of evidence are agreed by the parties to arbitration either explicitly or by incorporation of the relevant arbitration rules and soft-law instruments in the parties' arbitration agreement. The ICA Law contains few rules of evidence. For example, the ICA Law allows the parties to submit documents they consider relevant to their cases together with their submissions or to rely on documents and other evidence to be submitted later in the proceedings. Additionally, the tribunal may rule that any written evidence must be accompanied by a translation into the language or languages agreed by the parties or determined by the tribunal.

The rules of evidence set out in the RF Arbitration Law are somewhat more detailed. For instance, under the RF Arbitration Law, unless agreed otherwise by the parties, they are entitled to submit additional evidence in the course of arbitration, unless the tribunal declines to admit such evidence in light of a delay in submitting it. The RF Arbitration Law also envisages that the tribunal can prompt the parties to submit additional evidence.

Under Article 27 of the ICA Law, an arbitral tribunal may request assistance from a competent Russian court in collecting evidence if arbitration is administered by a PAI. A competent court shall address such requests in accordance with the requirements of the APC and CPC.

In particular, under Article 74.1 of the APC, an arbitral tribunal in an arbitration seated in Russia and administered by a PAI may request assistance from arbitrazh courts situated within the territorial jurisdiction of the requesting court in collecting evidence. Arbitrazh courts can assist with collection of written and physical evidence or other documents and materials; they cannot provide assistance in ensuring that witnesses attend hearings.

Article 21 of the RF Arbitration Law stipulates that, unless agreed otherwise by the parties, arbitration is confidential and the hearings shall not be conducted publicly. Absent the consent of the parties, arbitrators and employees of PAIs cannot disclose information of which they have become aware in the course of arbitration. In addition, arbitrators cannot be called as witnesses to testify on such information.

At the same time, there are no direct requirements as to confidentiality under the ICA Law. Confidentiality requirements are agreed by the parties to international arbitration either explicitly or by incorporation of the relevant arbitration rules containing such requirements in the parties' arbitration agreement.

Article 31 of the ICA Law requires an arbitral award to:

  • be made in writing and signed by the arbitrator or arbitrators (in arbitrations referred to tribunals it is sufficient for the award to bear the signatures of the majority of the tribunal, provided that the reason for any absent signature is stated);
  • set out the reasons upon which it is based, the relief awarded, the amount of the arbitration fees and their allocation between the parties;
  • indicate the date and place of arbitration.

The ICA Law does not establish any default time limits on the delivery of awards.

There are no express limits on the types of remedies that an arbitral tribunal can award, to the extent that such remedies are civil law remedies. For instance, in principle, an arbitral tribunal can award not only damages, be they pecuniary or moral, but also injunctions, specific performance, certain declaratory relief, etc. Remedies that do not meet the requirements on arbitrability (eg, remedies in disputes of a public law nature) cannot be awarded.

However, in terms of civil law remedies, some types of remedies are alien to Russian law, and Russian courts may find arbitral awards granting such remedies to be contrary to Russian public policy and hence annullable or unenforceable (eg, arbitral awards granting punitive damages).

Under Russian law, interest is normally considered a substantive law issue. The availability, rate and categories of interest are therefore a matter of the law applicable to the merits of the dispute. Under Russian law, the parties are entitled to recover interest under Article 395 of the Civil Code of the Russian Federation at the key rate of the Central Bank of the Russian Federation up to the day on which the amounts awarded are paid by the respondent.

The RF Arbitration Law stipulates that, unless agreed otherwise by the parties, the tribunal shall allocate the costs of arbitration, including legal fees, based on the 'costs follow the event' principle. However, the ICA Law does not contain default rules governing the allocation of legal costs.

The grounds for appealing an arbitral award are set out in Article 34 of the ICA Law and detailed below.

An arbitral award can be set aside if the party seeking this furnishes the court with proof that:

  • one of the parties to the arbitration agreement was under some incapacity, or the agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the Russian Federation;
  • the party requesting annulment of the award was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings, including the time and place of the arbitration hearings, or was unable to present its case due to other sound reasons;
  • the arbitral award deals with a dispute not contemplated by or not falling within the terms of the arbitration agreement, or contains decisions on matters beyond the scope of the arbitration agreement – if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or
  • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or Russian federal laws.

An arbitral award can also be set aside if the court finds that:

  • under Russian federal laws the subject matter of the dispute is not arbitrable; or
  • the arbitral award is contrary to Russian public policy.

The procedure for annulment of an arbitral award is governed by the APC and the CPC. An award debtor may apply for annulment of an award of a tribunal seated in Russia by filing an application with a competent court that has jurisdiction over the territory where the award was rendered. Such application must be filed within three months of the date on which the award debtor received the award and must satisfy the requirements as to the form and content of the application. The applicant must enclose with the application, among other things, an original or duly certified copy of the award and an original or duly certified copy of the arbitration agreement together with their duly certified translations into Russian (if necessary).

The court is required to consider the annulment application within one month from the date of its receipt, in accordance with the procedural rules governing consideration of claims by courts of first instance, albeit with certain particularities (eg, there will be a hearing, but the court cannot review the award on the merits).

After considering the annulment application, the court issues a ruling upholding the award or setting it aside. The ruling enters into force immediately and can be further appealed.

Pursuant to Article 34(1) of the ICA Law, if the parties agree to submit their disputes to a PAI, they may agree, by including an express provision in the arbitration agreement between them, that the arbitral award shall be final, thereby excluding the possibility of its review and annulment by the courts. However, the grounds for setting an arbitral award aside and for denying enforcement of an arbitral award are essentially the same. Therefore, if the successful party tries to enforce the award in a Russian court, the losing party will be able to oppose its enforcement on the same grounds as are available in seeking to have it set aside.

The courts cannot review an award on the merits. However, the concept of public policy is often interpreted by the courts so broadly that, when reviewing an arbitral award to ascertain whether it contravenes public policy, often the merits of the decision are in fact reviewed.

The USSR (to which Russia is a legal successor) ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards on 24 August 1960, with the following reservation: the Union of Soviet Socialist Republics will apply the provisions of the Convention in respect to arbitral awards made in the territories of non-contracting states only to the extent to which they grant reciprocal treatment.

The procedure for enforcing awards is set out in the APC and the CPC. The procedure is largely similar for, on the one hand, recognition and enforcement of foreign awards and, on the other hand, obtaining writs of execution in respect of arbitral awards rendered in international arbitration seated in Russia. However, where the award is foreign and its nature is such that it requires only recognition and does not require enforcement, the award is recognised in Russia without any further proceedings (ie, automatically, provided that the debtor does not file objections to this within the prescribed time limit).

As a general rule, a creditor may enforce an award by filing an application with a competent court at the debtor's place of residence or location or, if its place of residence or location is unknown, at the place where the debtor's assets are located.

The creditor shall enclose with its application, among other things, an original or duly certified copy of the award and an original or duly certified copy of the arbitration agreement, together with their duly certified translations into Russian (if necessary).

The court is required to consider the enforcement application within one month from the date of its receipt, in accordance with the procedural rules governing consideration of claims by courts of first instance, albeit with certain particularities (eg, there will be a hearing, but the court cannot review the award on the merits).

After considering the enforcement application, the court issues a ruling recognising and enforcing the arbitral award or denying its recognition and enforcement. The ruling enters into force immediately and can be further appealed.

Enforcement Issues

As provided for by Article V(1)(e) of the New York Convention, Russian courts may refuse to recognise and enforce an award at the request of the party against whom it is invoked, if that party furnishes the courts with proof that the award has been set aside by a competent authority of the country in which, or under the law of which, the award was made. Accordingly, where an arbitral award has been set aside by a competent authority, the Russian courts have discretion to enforce the award in Russia.

Russia is also party to the 1961 European Convention on International Commercial Arbitration. Article IX(1) and (2) of the European Convention limit the application of Article V(1)(e) of the New York Convention solely to cases of setting aside specified under Article IX(1) of the European Convention. Therefore, an award annulled in a state that is party to the European Convention on the basis of non-arbitrability of the dispute that was referred to arbitration or due to the award's contravention of the public policy of the state of origin may nevertheless be enforceable in Russia.

Sovereign Immunity

Issues of sovereign immunity, which may be raised at the enforcement stage, are regulated by Federal Law No 297-FZ of 3 November 2015 On Jurisdictional Immunities of Foreign States and the Property of Foreign States in the Russian Federation (the Immunities Law). Article 2 of the Immunities Law differentiates several types of state immunity, including immunity from jurisdiction and immunity from execution.

Pursuant to Article 6(2) of the Immunities Law, a foreign state shall be deemed to have waived its immunity from jurisdiction with respect to disputes related to an arbitration agreement if the state is a party to that arbitration agreement for resolving the disputes which have arisen or which may arise in the future with respect to performance of obligations. Russian courts have held that, where a state enters an arbitration clause referring to arbitration rules pursuant to which the award shall be final and binding on the parties, and the parties undertake to implement the award without delay, the state thereby waives immunity from jurisdiction for the purposes of recognition and enforcement proceedings. However, by entering an arbitration clause the state does not waive immunity from execution.

It is common practice among Russian courts to rely on public policy as grounds to dismiss an application for recognition and enforcement of arbitral awards. There is no statutory definition of public policy, but generally Russian courts treat it as domestic (not international) standards that are violated if an award

  • contravenes:
    1. fundamental principles of law which
      1. have imperative superiority, universality and specific social and public importance,
      2. form the basis for the economic, political and/or legal systems of the state, or
    2. overriding mandatory provisions; and/or
  • is detrimental for:
    1. the sovereignty or security of the state;
    2. interests of major social groups; and
    3. constitutional rights and freedoms of individuals.

For instance, Russian courts refuse to recognise and enforce arbitral awards that may adversely affect the interests of creditors in bankruptcy proceedings, the state budget, antitrust regulations, etc.

Some Russian courts tend to interpret the concept of public policy very broadly and sometimes unreasonably rely on public policy grounds.

Russian law does not provide for class-action or group arbitration. These types of claims are not arbitrable (Article 33(3) of the APC).

In Russia, there are no ethical codes that apply specifically to arbitration counsel and arbitrators. Where arbitration counsel are admitted to the Russian Bar, their conduct is governed by the Code of Professional Ethics for Advocates. The parties to arbitration may agree on the applicability of the 2013 IBA Guidelines on Party Representation in International Arbitration.

There are no rules or restrictions on third-party funders. Generally, the concept of third-party funding is alien to Russian law and there is no regulation in this regard. To date only a few cases have been funded by third parties in Russia. Considering that Russian courts mainly take a negative view of success fees, third-party funding arrangements may not necessarily be enforceable in Russia.

The ICA Law does not address the issue of consolidation of separate arbitral proceedings. Generally, this issue is governed by the arbitration rules agreed by the parties.

In principle, an arbitration agreement extends only to the entities that are parties to it and does not extend to third parties.

Clifford Chance CIS Limited

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Law and Practice in Russia

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Clifford Chance is one of the world's leading law firms, combining the highest global standards with specialised local expertise. The firm has over 3,200 legal advisors in 32 offices across 21 countries. Clifford Chance focuses on providing unrivalled service in each area of interest in the commercial sector including banking and finance, corporate and M&A, real estate and construction, litigation and dispute resolution, tax, financial regulation and capital markets. Clifford Chance CIS Limited was established in Moscow in 1991 and is one of the leading international law firms in Russia served by approximately 60 lawyers, including seven partners.