Throughout the Soviet period, arbitration was the norm for resolution of international commercial disputes with Soviet parties owing to foreign parties’ desire to avoid the Soviet court system. Arbitration would often take place outside the USSR (most commonly, at the Arbitration Institute of the Stockholm Chamber of Commerce) or, less frequently, before the Moscow-based Foreign Trade Arbitration Commission (FTAC) or the Maritime Arbitration Commission of the Soviet Union (MAC), both originally established in the 1930s. The procedural rules of both the FTAC and MAC were seen as skewed in favour of the Soviet party (eg all arbitrators had to be of Russian nationality) and foreign parties generally tried to avoid appearing before these institutions if possible.
Since the fall of the Soviet Union, the Russian Federation has adopted a new international arbitration law based on the Model International Arbitration Act of the United Nations Commission on International Trade Law (the ‘Model Law’), and new procedural rules for the FTAC’s successor, the International Commercial Arbitration Court (ICAC), based in Moscow and attached to the Chamber of Commerce and Industry of Russia (CCI). This has made arbitration in Russia more palatable for foreign parties. At the same time, the development of the commercial (arbitrazh) courts has brought the Russian court system more or less in line with Western standards with regard to commercial arbitration. Taken together, these changes suggest that the Russian government supports arbitration and recognises that a just and coherent alternative dispute resolution system is crucial to attract and maintain foreign investment in the country. Arbitration has thus increased in popularity among foreign and Russian parties. In particular, the ICAC has seen its case load increase dramatically in recent years.
Professor Komarov, Chairman of the ICAC, has stated that the adoption of the Commercial Procedure Code of the Russian Federation of 2002, which governs the relationship between arbitral tribunals and the state courts, is evidence of positive change. However, he emphasises that the state courts have not yet gained enough experience with regard to the enforcement of arbitral awards (A S Komarov ‘Some Issues of Current Interest with Regard to International Commercial Arbitration in the Russian Federation’ (Nekotorye Aktualnye Voprosy Mezhdunarodnogo Kommercheskogo Arbitrazha v Rossiyiskoi Federazii) (2004) 1 Mezhdunarodny Kommerchesky Arbitrazh 6).
* Tara Conklin, Pavel Boulatov and Irina Sergeeva contributed to the preparation of this chapter.
Russia is a federation, but the precise distribution of powers between the central government and the regional and local authorities is still evolving. Since 1 December 2005 the Russian Federation has consisted of 88 regional administrative units (there had been 89, but two were recently merged). These units are grouped into seven federal districts.
On 7 July 1993, Russia enacted the International Commercial Arbitration Act (No 5338–1; Vedomosti S’ezda Narodnyh Deputatov RF and Verkhovnogo Sovieta RF, 1993, No 32, Item 1240, the ‘International Arbitration Act’) based on the Model Law. This is the primary statute governing international arbitration. A dispute may be submitted to international commercial arbitration under the International Arbitration Act only if: (1) it ‘arises in the course of foreign trade and other forms of international economic relations’ and one of the parties is located abroad; or (2) at least one of the parties is a company with foreign investments established in the territory of the Russian Federation (International Arbitration Act, art 1(1)).
On 27 July 2002, the Federal Law on Arbitration Tribunals of the Russian Federation (No 102-FZ; Rossiyskaya Gazeta, No 137, 2002, the ‘Law on Arbitration Tribunals’) came into force. This statute governs the arbitration of domestic disputes, and is not applicable in cases of international commercial arbitration.
Arbitration tribunals should not be confused with the Russian commercial (or arbitrazh) courts. Despite their name (in Russian, Arbitrazhnye sudy), the commercial courts adjudicate commercial matters and are not arbitral fora. The commercial courts are permanent state courts that were restructured in April 1995 with the Law On Commercial Courts in the Russian Federation (Federal Constitutional Law of the Russian Federation No 1-FKZ of 28 April 1995, Sobranie Zakonodatelstva, No 18, Item 1589) and the Commercial Procedure Code (Commercial Procedure Code of the Russian Federation No 95-FZ of 24 July 2002, Rossiyskaya Gazeta, No 137, 2002) to resolve civil law disputes between commercial entities. The commercial courts have jurisdiction over ‘economic disputes’ involving legal entities and/or individuals registered and doing business as individual entrepreneurs in Russia as well as foreign legal entities and individuals engaged in business activities, and the Russian Federation (and its agencies) and subjects of the Russian Federation (Commercial Procedure Code, art 27). The commercial courts also have jurisdiction over so-called ‘public legal relations’ connected with business activities.
Federal law confers exclusive jurisdiction on the commercial courts for certain specified matters, such as bankruptcy proceedings, disputes connected with the establishment, reorganisation and liquidation of legal entities (Commercial Procedure Code, art 33). The Commercial Procedure Code provides a separate list of disputes subject to the exclusive jurisdiction of the Russian commercial courts in cases where one of the parties is a foreign company (art 248). The list includes disputes concerning privatisation of state property, immovable property located in Russia, the registration of patents and trademarks, and the establishment, liquidation and restructuring of Russian legal entities. This exclusive grant of jurisdiction may not be changed by agreement of the parties. Absent an agreement to arbitrate, a dispute involving foreign and Russian business entities would almost invariably end up in a commercial court. Subject to certain limited exceptions and with the parties’ consent, a commercial court can refer any dispute to arbitration.
Russia also has a system of courts of general jurisdiction (‘civil courts’). The civil courts are the forum for all criminal matters and the default forum for any civil matter that is not specifically subject to the jurisdiction of the commercial courts. Jurisdiction and procedure of the civil courts are governed by the Civil Procedure Code (Civil Procedure Code of the Russian Federation, No 138-FZ of 14 November 2002; Sobranie Zakonodatelstva, No 46, Item 4532). Like the commercial courts, civil courts can hear disputes involving Russian and/or foreign parties.
In the area of commercial arbitration, the commercial courts are empowered to: (1) recognise and enforce foreign arbitral awards; (2) enforce awards of domestic arbitration tribunals; and (3) set aside awards of domestic arbitration tribunals in accordance with their jurisdiction (see below). The Commercial Procedure Code contains the specific rules on recognition, enforcement and annulment of arbitral awards (described further below).
Russia is a party to the Convention on the Manner for Resolving Disputes related to the Carrying Out of Economic Activity of 1992. The parties of this convention are ten members of the Commonwealth of Independent States (CIS). This Convention governs arbitration between CIS trading partners.
Russia is a party to the Convention on the Settlement by Arbitration of the Civil Law Disputes Resulting from Economic, Scientific and Technical Cooperation of 1972. Only Russia, Mongolia and Cuba are still signatories to this Convention.
Russia is a party to a number of bilateral treaties that contain provisions concerning arbitration.
Russia has signed, but not ratified, both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ‘ICSID Convention’) and the Energy Charter Treaty.
Russia has two long-standing centres of international arbitration, and a number of newer institutions with limited jurisdiction over certain types of domestic and international disputes. Only the major institutions are described below.
The principal institution for international arbitration in Russia is, as noted above, the ICAC, based in Moscow and attached to the CCI (see www.tpprf.ru/). The ICAC’s predecessor was the Foreign Trade Arbitration Commission (FTAC), originally established in 1932 to improve the Soviet Union’s image as a reliable trading partner. Since 1 May 1995, however, the ICAC has operated under procedural rules based on the UNCITRAL Model Rules (the ‘ICAC Rules’). The latest changes to the ICAC Rules concerning arbitration fees were introduced on 28 March 2005. New procedural rules for the ICAC are scheduled to come into force on 1 March 2006.
The ICAC’s jurisdiction extends beyond strictly ‘international’ matters to include ‘disputes arising between enterprises with foreign investments and international associations, and organisations, set up in the territory of the Russian Federation, as well as disputes between their participants, and also disputes between them and other subjects of the law of the Russian Federation’ (ICAC Rules, art 1). Accordingly, a dispute between two Russian legal entities, one of which has foreign investors, can be arbitrated before the ICAC even if the dispute involves matters occurring only within Russia. The ICAC can therefore offer an alternative forum to Russian parties (with foreign investors) wishing to avoid the Russian court system.
The ICAC enjoys a generally favourable reputation in Russia as well as abroad. According to the ICAC website (www.tpprf.ru), approximately 450 claims are filed with the ICAC annually. The ICAC is also reasonably priced in comparison with most other well-known arbitration institutions.
The MAC, also described above, dates back to the 1930s and, since 1993, has been under the auspices of the CCI (the Law of the Russian Federation On Chambers of Commerce and Industry of the Russian Federation, No 5340–1 of 7 July 1993; Rossiyskaya Gazeta, No 154, 1993). The MAC Statute (see Appendix 2 of the International Arbitration Act) defines the MAC’s jurisdiction to include disputes dealing with salvage, marine insurance, collision, affreightment, pilotage and any other dispute arising from a contractual or civil law relationship originating in commercial navigation merchant shipping (MAC Statute, art 2).
The Arbitration Court for Resolution of the Economic Disputes is also an arbitration tribunal operating under the auspices of the CCI. It considers only disputes between legal entities and individual entrepreneurs registered in the CIS states. The CCI also oversees an arbitral tribunal associated with the Association of Average Adjusters and the Sports Arbitration Tribunal.
The chambers of commerce and industry of the major Russian cities also have their own arbitration tribunals.
The St Petersburg International Commercial Arbitration Court was established in 1997 by the St Petersburg Foundation for the Protection of Investments with the assistance of the Mayor’s Office of St Petersburg. Its procedural rules are based on the Model Rules (see www.pravocom.spb.ru/).
There are also a number of lesser-known arbitral institutions with jurisdiction over international and domestic disputes, including the arbitral tribunals at the Union of Jurists (see www.unionlawyers.ru/russia/eng/tasks.html) and the Moscow City Chamber of Commerce and Industry, which both accept general commercial disputes. The Moscow Interbank Currency Exchange (MICEX), the Association of Russian Banks (see www.arb.ru/site/eng/judge.php), and the National Association of Stock Market Participants (see www.naufor.ru/) have all established arbitral tribunals to resolve disputes arising specifically within their respective industries.
The institutions that hear domestic arbitrations are varied. The Commercial Procedure Code allows parties to submit a dispute arising out of civil law relationships to an arbitral tribunal unless otherwise provided by the federal law (art 4). A study carried out in 1997 for the commercial court system found that as many as 250 permanent arbitration tribunals existed in Russia for the resolution of domestic disputes. The list of Russian arbitration tribunals is available at www.arbitrage.spb.ru/. Most of these, however, have very narrow jurisdiction and there is little or no information available on their practice.
Article 148 of the Commercial Procedure Code provides that a court shall terminate proceedings in the event that the parties have concluded an arbitration agreement and one of the parties makes a timely objection. The court may allow proceedings to continue if it finds that the arbitration agreement is null and void, inoperative, or incapable of being performed.
A similar provision is found in the International Arbitration Act, which provides that a court seized of a dispute that is subject to an arbitration agreement shall refer the parties to arbitration, if requested to do so by one of the parties prior to submission of its first substantive statement, unless the court finds that the arbitration agreement is invalid (International Arbitration Act, art 8).
National courts may adopt interim measures with respect to arbitration proceedings. Article 90(3) of the Commercial Procedure Code provides that a commercial court may order interim measures upon application of a party to arbitration proceedings. The applicant must demonstrate that (1) the applicant will suffer significant harm or (2) execution of the future arbitral award will be difficult or impossible unless the court grants interim measures. Article 9 of the International Arbitration Act specifically provides that a party to an arbitration proceeding is entitled to apply to a state court for interim measures in support of the arbitration and such an application will not be considered contrary to the arbitration agreement. Interim measures are discussed in greater detail in section 13.1 below.
Article 16 of the International Arbitration Act provides that a tribunal may rule on its own jurisdiction. A jurisdictional challenge must be made no later than the submission of the statement of defence (International Arbitration Act, art 16(2)). A party’s objection that the tribunal has exceeded the scope of its authority during the course of the proceedings must be raised without delay (International Arbitration Act, art 16(3)).
A tribunal may rule on its own jurisdiction as a preliminary decision or as part of a decision on the merits of the dispute. If the ruling on jurisdiction is made as a preliminary decision, the opposing party may challenge such decision in the competent state court within 30 days of receipt of notice of the decision. The tribunal does not need to suspend proceedings if a party seeks to challenge the decision on jurisdiction in a state court. While a jurisdictional challenge is pending before a court, the arbitral tribunal may continue the proceedings and render an award (International Arbitration Act, art 16(3)).
Article 17 of the Law on Arbitration Tribunals contains nearly identical provisions with respect to domestic arbitration.
It is not uncommon for defendants to challenge the jurisdiction of a tribunal in arbitration proceedings by arguing that another tribunal or court has jurisdiction over the dispute. For example, challenging parties have referred to various international conventions allegedly applicable to the legal relations of the parties (ICAC Case No 239/2000, Award of 30 May 2001; Case No 226/2001, Award of 12 November 2003) or to the language of the arbitration clause if the name of the tribunal is not absolutely clear (ICAC Case No 292/1995, Award of 16 December 1996). Claimants have also made jurisdictional challenges with regard to counterclaims (ICAC Case No 304/1993, Award of 3 March 1995). In all of above cases, the ICAC dismissed the challenges.
Parties have also attempted to have the issue decided by state courts without first obtaining the tribunal’s ruling on its own jurisdiction. However, the commercial courts have generally found such attempts to be unlawful interference in the arbitration proceedings (see eg Ruling of the Federal Commercial Court of the North-West Region No A56–30789/02 of 9 January 2003).
A party may appeal the jurisdictional ruling of an arbitral tribunal before the appropriate state court. The commercial courts have consistently dismissed such appeals when none of the limited bases for reversal of the arbitration tribunal, as set out in the New York Convention, has been proved (see Ruling of the Federal Commercial Court of the Moscow Region No KGA40/2954–03 of 20 May 2003).
Even if the parties have not challenged jurisdiction, the arbitral tribunal usually scrutinises the arbitration clause and checks all grounds for its jurisdiction (ICAC Case No 207/2000, Award of 17 April 2002; Case No 57/1995, Award of 5 February 1996). It is not uncommon for the ICAC to find that it has no jurisdiction on its own initiative rather than on a motion by a party. The ICAC usually provides detailed reasons for its decision and examines the arbitration clause carefully in case there are any doubts.
Current Russian legislation does not provide for judicial reconsideration if the tribunal has decided that it has no jurisdiction (Ruling of the Federal Commercial Code of the Moscow Region No KG-A40/10241–03 of 25 December 2003). In accordance with the Commercial Procedure Code (art 235(1)), the International Arbitration Act (art 16(3)) and the Law on Arbitration Tribunals, state courts may consider challenges to a tribunal’s decision on jurisdiction only if the tribunal has ruled that it has jurisdiction with regard to the dispute.
Books
G K Dmitrieva Mezhdunarodnyi kommercheskii arbitrazh (Moscow: MZh Prospekt, 1997) A G Fedorov Mezhdunarodnyi kommercheskii arbitrazh (Moscow: Dashkov i Co Publishing House, 2000) E V Bruntseva Mezhdunarodnyi kommercheskii arbitrazh. Uchebnoe posobie dlia iuridicheskikh vuzov (Moscow: Sentyabr, 2001) S A Batova, S V Bobotov, O N Vedernikova et al Sudebnaia sistema Rossii (Moscow: Delo, 2001) K Hobér Enforcing Foreign Arbitral Awards against Russian Entities (Irvington-On-Hudson, New York: Juris Publishing, Inc, 1994) B R Karabelnikov Ispolnenie reshenii mezhdunarodnykh arbitrazhei. Kommentarii k N’iu-Iorkskoi konventsii 1958g. i glavam 30 i 31 APK RF 2002 g
(Moscow: FBK-Press Publishing House, 2nd edn, 2003)
A S Komarov (ed) Aktualnye voprosy mezhdunarodnogo kommercheskogo
arbitrazha (Moscow: Spark, 2002)
A I Muranov Ispolnenie inostrannykh sudebnykh i arbitrazhnykh reshenii.
Kompetentsia rossiiskikh sudov (Moscow: Yustitsinform, 2002)
Reynolds, Sarah Handbook on Commercial Dispute Resolution in the Russian Federation: a Guide for Businesses on Navigating the Russian Legal System for Resolution of Business Disputes. (Washington, DC: US Dept. of Commerce, 2000)
Journals A N Zhiltsov ‘Osparivanie reshenii mezhdunarodnykh kommercheskikh arbitrazhei v sootvetstvii s rossiiskim zakonodatelstvom’ (2005) 1 Mezhdunarodnyi kommercheskii arbitrazh 4 A A Kostin ‘Arbitrazhnoe soglashenie’ (2005) 2 Mezhdunarodnii kommercheskii arbitrazh 4 V P Zvekov ‘Nekotorye voprosy tolkovaniia mezhdunarodnykh kommercheskikh dogovorov i praktika mezhdunarodnogo kommecheskogo arbitrazhnogo suda’ (2005) 2 Mezhdunarodnii kommercheskii arbitrazh 17 V V Yarkov ‘Osparivanie dogovorov, okhvachennykh arbitrazhnym soglasheniem’ (2005) 3 Mezhdunarodnyi kommercheskii arbitrazh 5 A N Zhiltsov ‘Imperativnye normy v mezhdunarodnom kommercheskom arbitrazhe’ (2004) 2 Mezhdunarodnyi kommercheskii arbitrazh 16 A L Makovskyi and B R Karabelnikov ‘“Arbitrabilnost” sporov: rossiiskii podkhod’ (2004) 3 Mezhdunarodnyi kommercheskii arbitrazh 16 A S Komarov and B R Karabelnikov ‘Praktika Federalnogo arbitrazhnogo suda Moskovskogo okruga po delam, sviazannym s osparivaniem i privedeniem v ispolnenie mezhdunarodnykh arbitrazhnykh reshenii’ (2004) 4 Mezhdunarodnyi kommercheskii arbitrazh 7 I S Zykin ‘Osnovnye protsessualnye aspekty rassmotrenia sporov mezhdunarodnym kommercheskim arbitrazhem v Rossiiskoi Federatsii’ (2004) 4 Mezhdunarodnyi kommercheskii arbitrazh 33 D V Kurochkin ‘Obespechitelnye mery v rossiiskom sude v podderzhku inostrannogo arbitrazha’ (2004) 4 Mezhdunarodnyi kommercheskii arbitrazh 71 M Boguslavskii and B Karabelnikov ‘Ispolnenie reshenii mezhdunarodnykh arbitrazhei i ssylki na publichnyi poriadok’ (2003) 9 Khoz i pravo 134 U G Morozova ‘Otkaz v priznanii i privedenii v ispolnenie inostrannykh sudebnykh i arbitrazhnykh reshenii: osnovaniia publichnogo kharaktera’ (2000) 7 Vestn Vyssh Arb suda RF 142 V A Musin ‘Protivorechie publichnomu poriadku kak odno iz osnovanii dlia otkaza v prinuditelnom ispolnenii resheniia mezhdunarodnogo kommercheskogo arbitrazha’ (2003) 6 Treteiskii sud 82 S J Reynolds (ed) ‘Statutes & Decisions: The Laws of the USSR and its Successor States’ (Armonk, NY: ME Sharpe, Inc 1991– ) A Yakovlev ‘International Commercial Arbitration Proceedings and Russian Courts’ (1996) 13 J Int’l Arb 37
Based on art 7 of the International Arbitration Act, an arbitration agreement must be in writing and signed by the parties; it can take the form of a clause or a separate document. The agreement will be deemed ‘in writing’ if concluded in an exchange of correspondence (including telex, telegram or electronic communication) that provides a record of the agreement (International Arbitration Act, art 7(2)). An arbitration agreement will be deemed to exist if there is an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. If a contract references another document that contains an arbitration clause, the clause will be considered an arbitration agreement between the parties so long as the contract is in writing and the reference unequivocally incorporates the arbitration clause in the contract.
Article 7 of the Law on Arbitration Tribunals provides for nearly identical requirements for the existence of an arbitration agreement with respect to domestic arbitration. One exception is that an arbitration agreement will not be deemed to exist based solely on one party’s failure to object to the other party’s assertion of the agreement in an exchange of statements of claim and defence.
Arbitration is not mandated for any type of dispute in the Russian Federation.
Article 4 of the Commercial Procedure Code provides that the parties may submit any dispute arising from a civil law relationship to arbitration, unless federal law provides otherwise.
Some categories of dispute may not be referred to arbitration. For example, art 33 of the Federal Law No 127-FZ on Bankruptcy (Insolvency), dated 26 October 2002, prohibits any dispute with respect to bankruptcy to be submitted to arbitration.
In general, the following categories of disputes are not arbitrable: disputes between a taxpayer and tax authorities (administrative relations); disputes on the invalidation of an act of a state authority; labour disputes; family law disputes; and criminal matters.
There are also some ‘grey areas’ where Russian courts have tended to disfavour arbitrability, such as matters relating to state registration of shares, immovable property and trademarks and patents. There has not been significant court practice on these issues, however, and no firm rules can be said to exist.
The International Arbitration Act recognises that an arbitration clause may be separable from the underlying contract. Article 16 provides that an arbitration clause ‘shall be treated as an agreement independent of the other terms of the contract’ and that a decision to invalidate a contract does not automatically render the arbitration clause invalid.
Article 17 of the Law on Arbitration Tribunals provides the same rule for domestic arbitration.
Parties to an international arbitration are free to agree on any desired qualifications of potential arbitrators. Absent the parties’ agreement, the International Arbitration Act provides only that arbitrators must disclose, upon being approached in connection with possible appointment as a potential arbitrator, ‘any circumstances which may give rise to justifiable doubts as to his impartiality or independence’. Once appointed, arbitrators must without delay disclose any such circumstances to the parties (International Arbitration Act, arts 10 and 11).
The Law on Arbitration Tribunals provides that arbitrators in domestic arbitrations must be independent and impartial, and also imposes some additional requirements. A sole arbitrator or the chairman of a panel must have higher legal education. A person who is indicted as a criminal or has been convicted of a crime may not serve as an arbitrator, nor may someone who holds certain types of official position (art 8).
The ICAC imposes some additional noteworthy rules regarding the appointment of arbitrators. Before the adoption of ICAC Rules in May 1995, parties were forced to choose arbitrator(s) from a list maintained by the ICAC (‘the List’). All arbitrators on the List were Russian. Since May 1995, the ICAC has relaxed this approach to allow for parties to appoint arbitrators regardless of whether they appear on the List, subject to two caveats: (1) if the arbitration agreement calls for a single arbitrator and the parties fail to agree on a candidate, the ICAC will appoint one from the List; and (2) if the arbitration agreement calls for a panel of three or more arbitrators, the chairman of the panel must be selected from the List (ICAC Rules, arts 20 and 21; new ICAC Rules, art 17). The List currently contains the names of Russian and non-Russian candidates and is available on request from the ICAC.
The parties are free to agree on a procedure for challenging an arbitrator (International Arbitration Act, art 13(1)). Absent such agreement, art 13 of the International Arbitration Act sets out the procedure for a party to challenge an arbitrator. The party must submit its challenge in writing to the arbitral tribunal within 15 days of becoming aware of the constitution of the tribunal. The ICAC Rules provide that if a challenge is submitted after the period of 15 days has expired, it still may be considered in case the excuse for the delay will be found valid (ICAC Rules, art 24). The new ICAC Rules impose additional restrictions and do not provide for the possibility of submitting challenges beyond the established time limits (new ICAC Rules, art 18). The tribunal itself decides the challenge (unless the arbitrator voluntarily withdraws), with a right of appeal to the president of the CCI. While pending appeal, the tribunal may continue the proceedings and make an award. A decision by the president of the CCI is not subject to further appeal. In accordance with the new ICAC Rules the challenge is considered by the Presidium of the ICAC and not by the rest of the panel (new ICAC Rules, art 18).
An arbitrator may be challenged only on grounds of lack of independence or if he or she does not possess qualifications required by the agreement of the parties. Moreover, a party may challenge its own appointed arbitrator only for reasons of which the party becomes aware after the appointment (International Arbitration Act, art 12).
Neither the International Arbitration Act nor the ICAC Rules expressly contemplate a court action regarding the challenge or removal of an arbitrator.
In domestic arbitration, if the arbitrator does not meet the requirements of art 8 of the Law on Arbitration Tribunals, he or she may be challenged. The party may submit the motion to dismiss an arbitrator within five days after the party received information that the panel was improperly constituted or that there are other grounds for the challenge, unless otherwise provided by agreement of the parties or by the applicable rules. If the arbitrator does not recuse him or herself and another party disagrees with the challenge, the matter will be considered by the other arbitrators on the panel or by the sole arbitrator (Law on Arbitration Tribunals, art 12).
Decisions concerning the challenge of an arbitrator may not be appealed to the state courts.
Arbitrators are rarely challenged in practice, and such challenges are not usually described in the final award in any detail (see ICAC Case No 207/2000, Award of 17 April 2002). There is no available precedent that addresses a party’s successful challenge of an arbitrator.
If one co-arbitrator on a panel has been removed and a replacement appointed, there are different points of view concerning the need to re-elect the chairman. While some believe that the other arbitrators have the right to elect the chairman, other scholars argue that the chairman need not be reelected (E A Vasilev Composition Formation of the Arbitration. Qualification of the Arbitrators (Formirovanie Sostava Arbitrazha, Kvalifikatsia Arbitrov) (Moscow: Spark, 2002), ‘Aktualnye voprosy mezhdunarodnogo kommercheskogo arbitrazha’).
There are general civil law rules concerning liability for wrongful acts. However, Russian legislation does not contain any special rules concerning the liability of arbitrators arising from their decision-making functions. This issue has not been widely addressed in court practice or academic writing.
10. PARTY REPRESENTATION
The International Arbitration Act is silent on the question of requisite qualifications for party representatives. Generally, in international arbitration practice, parties may appoint representatives at their own discretion. For international arbitrations before the ICAC, the ICAC Rules expressly provide that parties are free to present their cases directly or through any duly authorised representative(s) appointed at the party’s discretion. The ICAC Rules state that a party representative may include foreign citizens or representatives from foreign organisations (ICAC Rules, art 28(1); new ICAC Rules, art 27).
For domestic arbitrations governed by Russian law, there are no qualification requirements for party representatives. As in the Russian courts, Russian parties can, and often do, represent themselves before an arbitral tribunal.
However, any representative of the party should be duly authorised to perform his or her duties. Accordingly, a power of attorney should be issued to a party representative in accordance with the general rules on powers of attorney set out in the Civil Code of the Russian Federation (Part I, No 51-FZ of 30 November 1994; Sobranie Zakonodatelstva, No 32, Item 3301). A power of attorney issued outside Russia will be considered valid if it complies with the relevant rules of the state concerned. The chief executive officer of a company may represent the company without a power of attorney.
Article 20 of the International Arbitration Act provides that the parties ‘are free to agree on the place of arbitration’. Failing such agreement, the tribunal shall determine the seat, having regard to the circumstances of the case and the convenience of the parties. The International Arbitration Act also provides that, notwithstanding the seat of the arbitration, the tribunal may meet at any other place it considers appropriate.
The ICAC Rules provide that the seat of the arbitration is Russia and the hearings are to be held in Moscow. Article 7 of the ICAC Rules provides that either the parties or the tribunal may decide to hold hearings in another place in the territory of the Russian Federation. Under art 22 of the new ICAC Rules the parties may agree to hold the hearings outside Russia.
Article 20 of the Law on Arbitration Tribunals sets out similar rules for domestic arbitration as those found in art 20 of the International Arbitration Act. The Law on Arbitration Tribunals also provides that the seat of the tribunal shall be determined in accordance with the tribunal’s own institutional rules.
The procedures to be followed in international arbitrations are broadly subject to the parties’ agreement (International Arbitration Act, art 19(1)). The International Arbitration Act sets out several general procedural rules, subject to any contrary party agreement (International Arbitration Act, arts 21, 23–27). For example, the claimant shall submit a Statement of Claim, setting out the facts supporting the claim, the points at issue and the relief or remedy sought, and the respondent shall submit a Statement of Defence in respect of the claim, unless the parties have agreed otherwise as to the required elements of such statements (International Arbitration Act, art 23). Should the parties fail to agree on appropriate procedures, the tribunal may conduct the arbitration as it considers appropriate (International Arbitration Act, art 19(2)).
The only mandatory procedures are: (1) that the parties shall be given sufficient advance notice of any hearing or meeting of the tribunal for the purposes of inspection of goods, other property or documents; and (2) that any statements, documents or other information supplied to the tribunal by one party shall be communicated to the other party, and any evidence on which the tribunal may rely in making its decision shall be communicated to the parties (International Arbitration Act, art 24(2) and (3)).
The procedures provided for by the Law on Arbitration Tribunals for domestic arbitration are similar to those of the International Arbitration Act (Law on Arbitration Tribunals, arts 4, 19, 23, 24).
There is no tradition of broad, US-style discovery in Russian court or arbitration practice (international or domestic). Before the adoption of the International Arbitration Act, the production and presentation of evidence was very limited. Arbitral tribunals could not compel witnesses, experts or parties to appear, witnesses were not sworn and only very limited cross-examination was permitted.
Under the International Arbitration Act, the parties are generally free to agree on the approach to tendering and gathering of the evidence they wish to employ (International Arbitration Act, art 19). Absent party agreement, the arbitral tribunal will determine the procedures relating to evidence. The International Arbitration Act permits parties to submit ‘all documents they consider to be relevant’ with their written pleadings (art 23). If a party fails to produce documentary evidence on which it seeks to rely, the arbitral tribunal may continue the proceedings and make the award based on the evidence before it (International Arbitration Act, art 25). A tribunal may also appoint an expert (International Arbitration Act, art 26). The Law on Arbitration Tribunals contains similar rules on evidence gathering in domestic arbitration (arts 26, 28, 29).
Article 27 of the International Arbitration Act provides that state courts may assist in gathering evidence. The arbitral tribunal, or a party with consent of the tribunal, may apply to the competent state court. The court may render its assistance, subject to the rules of procedure provided by the Commercial Procedure Code concerning the gathering of evidence and granting of interim relief. Motions connected with the gathering of evidence are usually considered by the lower courts; no practice cassation or Higher Commercial Court practice is available.
Arbitral tribunals have some powers to compel the production of evidence. For example, the tribunal may require a party to produce any relevant information, including documents, goods or other property, to a tribunal-appointed expert (International Arbitration Act, art 26(1); Law on Arbitration Tribunals, art 29). An arbitral tribunal may not compel the attendance of third parties or their production of evidence.
The International Arbitration Act provides that a party with the approval of the arbitral tribunal may also request assistance in taking evidence from an appropriate court (art 27). The court’s powers to compel the production of evidence will of course be limited by the governing law and procedural rules.
Under the ICAC, the parties are expressly charged with proving the facts on which they rely in support of their claims or defences (ICAC Rules, art 34; new ICAC Rules, art 31). Accordingly, the ICAC may direct the parties to present documentary evidence, direct expert examination, obtain evidence from third parties, and summon witnesses (ICAC Rules, art 34; new ICAC Rules, art 31).
With respect to an investment arbitration procedure, bilateral investment treaties (BITs) generally refer to the UNCITRAL Arbitration Rules or the rules of procedure of major arbitral institutions.
Domestic and international arbitral tribunals in Russia may grant interim relief. Article 17 of the International Arbitration Act provides that a tribunal may, at the request of a party, ‘order any party to take such interim measures of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute’. This expressly includes the power to order a party to provide appropriate security. The ICAC Rules also contain a similar provision (ICAC Rules art 30; new ICAC Rules, art 36).
Courts can also play a role in granting interim relief. Article 9 of the International Arbitration Act provides that ‘it is not incompatible with an arbitration agreement’ for a court to order interim measures of protection or to take a decision granting such measures. An identical provision is found in art 25 of the Law on Arbitration Tribunals.
Parties to an arbitration agreement may apply for interim measures in the commercial courts before or during the arbitration proceedings (Commercial Procedure Code, arts 90 and 99). The Merchant Shipping Code (No 81-FZ of 30 April 1999; Rossiyskaya Gazeta, No 85–86, 2005) provides for special procedures for interim measures concerning the arrest of seagoing ships in maritime disputes.
Parties to arbitration proceedings first obtained the right to apply to a state court for interim relief when the new Commercial Procedure Code entered into force in 2002. Before 2002, state courts dismissed such motions on the ground that there were no relevant provisions in the Commercial Procedure Code and Civil Procedure Code (despite the fact that there were such provisions in the International Arbitration Act).
In accordance with the ICAC Rules (art 1(6)) the Chairman of the ICAC may, at the request of a party to the arbitration proceedings, determine the amount and form of interim measures before the tribunal has been empanelled. There are differing views regarding the enforceability of the Chairman’s decision. One view is that such a decision may not be enforced by the state commercial courts as the Commercial Procedure Code 2002 provides only for the enforcement of arbitral awards (Presentation of the Monastyrsky, Zyuba, Stepanov and Partners Law Office on Interim Relief Granted by the State Courts in Support of Arbitration Proceedings of 7 July 2005). Another view is that enforcement of rulings of the ICAC and MAC Chairmen may be enforced (V V Yarkov Commentaries to the Commercial Procedure Code of the Russian Federation (Moscow: Wolters Kluwer, 2004)). Annexes 1 and 2 to the International Arbitration Act provide that the Chairmen of the ICAC and the MAC may grant interim measures. The International Arbitration Act permits parties to apply for the enforcement of the Chairmen’s ruling on interim measures. Although no relevant commercial court practice is available, one commentary notes that before the Commercial Procedure Code entered into force, the civil courts would enforce such a ruling (Presentation of the Monastyrsky, Zyuba, Stepanov and Partners Law Office on Interim Relief Granted by the State Courts in Support of Arbitration Proceedings of 7 July 2005).
The most significant issues connected with the granting of interim relief were examined by the Higher Commercial Court of the Russian Federation, and some examples of specific cases were cited in its Review of Court Practice Concerning Interim Relief (Letter of Information of the Higher Commercial Court No 78 of 7 July 2004).
For instance, the party filing a motion for interim relief must prove that dismissal of the motion would lead to the impossibility of executing any future award and would cause serious damage to the party. Mere reference to the fact that the other party might dispose of the property in question is not sufficient. The commercial courts require clear evidence that the defendant is certain to dispose of it (para 2 of the above-mentioned Letter of Information).
The commercial court may also dismiss a motion for interim relief if such a motion was already granted by the arbitration tribunal and there is no evidence of non-compliance (para 24 of the above-mentioned Letter of Information).
There are also some aberrant rulings of the commercial courts. For example, in the ruling of the Povolzhskyi Region No A12–30011/03-C13 of 20 May 2003, the court decided that the arbitral tribunal is not entitled to grant interim relief. That holding contradicts the provisions of the International Arbitration Act and the Law on Arbitrational Tribunals.
The fees of foreign arbitrators conducting hearings in Russia are considered taxable income in Russia (Chapter 23 of the Tax Code of the Russian Federation, Part II, No 117-FZ of 5 August 2000; Sobranie Zakonodatelstva, No 32, Item 3340).
The fees paid by the parties to a Russian arbitral institution are considered payment for services rendered. Therefore, the fees that are paid to the arbitral institution are subject to corporate income tax and VAT: see art 38, para 5, art 39, para 1, art 146 and art 249 of the Tax Code of the RF; Parts I and II (Tax Code of the Russian Federation, Part I, No 146-FZ of 31 July 1998; Sobranie Zakonodatelstva, No 31, Item 3824; Letters of the Ministry of Taxation No 03–1-09/2237/16 of 21 July 2003; No 03–1-08/1191/152 of 13 May 2005).
If a party fails to appear at a hearing without ‘sufficient cause’, a tribunal may continue the proceeding and make an award (International Arbitration Act, art 25). The International Arbitration Act also provides, however, that the parties shall be given ‘sufficient advance notice’ of any hearing and that each party be given a ‘full opportunity’ to present its case (International Arbitration Act, arts 18 and 24).
Under the ICAC Rules, the failure of a party to appear at a hearing shall not prevent the tribunal from considering the case and making an award, providing that the party has been duly notified of the time and place of the hearing and has not made a request in writing for adjournment of the proceedings for good reasons (ICAC Rules, art 28(2); new ICAC Rules, art 32(4)).
The Law on Arbitration Tribunals does not provide for the failure of the parties to appear before a domestic arbitral tribunal. The parties are, however, granted equal rights to present their case and must be notified of the time and place of the proceedings (Law on Arbitration Tribunals, art 23).
Failure to notify a party properly is a basis for rejecting a petition for enforcement of a foreign arbitral award (Commercial Procedure Code, art 244) or for the setting aside of an arbitral award issued by a domestic tribunal (Commercial Procedure Code, art 233) in the commercial courts.
An arbitral award must be in writing, state the date and place of arbitration and be signed by the arbitrator(s). If the tribunal is composed of more than one member, signatures from the majority of the tribunal members will suffice if the award specifies the reasons why the remaining signature(s) are absent. An award must also state the reasons upon which it is based, the resolution regarding satisfaction or rejection of the claim, the amount of arbitral fees and costs, and their apportioning. The tribunal must deliver a signed copy of the award to each party (International Arbitration Act, art 31). Similar requirements are provided for in the Law on Arbitration Tribunal for the rendering of awards in domestic arbitrations (art 33).
The ICAC has a number of procedural requirements for the form and content of an award (ICAC Rules, arts 40, 41; new ICAC Rules, arts 39, 42). Notably, the operative part of an award is first announced orally to the parties (unless the tribunal decides otherwise), with a reasoned award in writing to follow no more than 30 days after the announcement. Only the President of the ICAC may prolong the period for issue of an award (ICAC Rules, art 40). The new ICAC Rules omit the rule concerning the oral announcement of the award to the parties. Rather, the award should be sent to the parties after it is issued and signed by the panel (new ICAC Rules, art 42).
Arbitrators may fashion awards in accordance with the applicable law.
The International Arbitration Act provides that an arbitral tribunal may correct or clarify an award on its own initiative or on the request of any of the parties. A party may also request that the tribunal make an additional award as to a claim presented in the proceedings, but omitted from the award (International Arbitration Act, art 33).
In accordance with the Law on Arbitration Tribunals, a party may apply within ten days from receipt of an award for an additional award or for the clarification of the award. Corrections may be made on the initiative of the tribunal or at the request of the party.
International arbitral awards may be set aside by the courts in only a limited number of cases. Grounds for setting aside awards are similar to those for refusal of their enforcement set out in the New York Convention. A party must file its application to set aside an award within three months of receiving the award or, if the party has requested that the arbitral tribunal clarify or amend its award, within three months of the date on which that request has been disposed of by the arbitral tribunal (International Arbitration Act, art 34(3)).
Russian scholars stress that state courts have limited powers with regard to setting aside arbitral awards. Pursuant to art 34 of the International Arbitration Award, which mirrors art 5 of the New York Convention, a Russian court may not consider on its own initiative the majority of the grounds for setting aside an arbitral award. This stands in marked contrast to what was provided for in the Temporary Statute on Private Arbitration for the Resolution of Economic Disputes (the ‘Temporary Statute’, Supreme Soviet of the Russian Federation, Resolution No 3115–1 of 24 June 1992), which permitted courts to examine arbitral awards on the merits. The Temporary Statute is no longer in force.
There are numerous rulings of the Federal Commercial Court of the Moscow Region with regard to setting aside an arbitral award (see eg Ruling No KG-A40–5892–05 of 11 August 2005; Ruling No KG-A40–4342/05 of 15 June 2005). The courts generally apply only those grounds for setting aside provided by the International Arbitration Act.
Challenging parties often refer to procedural violations as a basis for setting aside an award. There are cases in which the court has set aside an award because of the absence of an arbitration clause (Ruling of the Federal Commercial Court of the Volgo-Vyatskyi Region No A43–8080/2004–23–220 of 8 October 2004), or because the dispute does not fall within the scope of the arbitration agreement (Ruling of the Federal Commercial Court of the East Siberian Region No A33–3728/03-C1-F02–3911/03-C2 of 12 November 2003), or because the tribunal was not composed in accordance with the agreement of the parties (Ruling of the Federal Commercial Court of the Central Region No A08–7941/02–18 of 2 September 2003).
Sometimes parties refer to violations of procedural or substantive law that are not mentioned among the grounds for setting aside of the arbitral award. In these cases the courts, as a general rule, have followed the provisions of law and dismissed the claims (see eg Ruling of the Federal Commercial Court of the Moscow Region No KG-A40/5297–05 of 27 June 2005).
The most problematic ground is the public policy clause, as it permits considerable judicial discretion. Violation of public policy is commonly raised as a defence to enforcement because the term has not been adequately defined. The Supreme Court in its Decision of 25 September 1998 gave the following definition:
‘The term “public policy” of the Russian Federation denotes the bases of the social order of the Russian state. A reservation relating to public policy is possible only in those extraordinary circumstances when the application of foreign law gives rise to a result that is impermissible from the point of view of Russian legal consciousness.’
The mere fact that Russian law was applied by the tribunal incorrectly does not mean that the public policy clause may be invoked to deny enforcement.
Generally speaking, the courts have been sceptical of public policy defences (see eg Ruling of the Federal Commercial Court of the West Siberian Region No F04/1298–338/A45–2004 of 10 March 2004; Ruling of the Federal Commercial Court of the North West Region No A42–3377/04–4 of 5 October 2004).
It is worth noting that there have been some contradictory rulings with regard to the burden of proof in cases involving the setting aside of an award due to lack of notice. In accordance with the New York Convention, the losing party bears the burden of proof to establish that it was not duly notified of the arbitration proceedings. However, in a number of cases Russian courts have found that the prevailing party must prove that the losing party was informed of the proceedings (Ruling of the Federal Commercial Court of the North Caucasus Region No F08–1372/2005 of 18 April 2005; Ruling of the Presidium of the Higher Commercial Court of the RF No 3253/04 of 22 June 2004). However, the Presidium of the Higher Commercial Court (Ruling No 14548/04 of 22 February 2005) recently reversed a lower court decision in this regard, finding that the burden of proof as to notice rests with the losing party.
Grounds to refuse enforcement of a domestic arbitral award are described in the Commercial Procedure Code and the Law on Arbitration Tribunals. A court may refuse to enforce a domestic arbitral award on the ground that the arbitral tribunal committed a serious procedural violation. This could include eg: the dispute lies outside the scope of the parties’ arbitration agreement; the composition of the tribunal or procedural rules adopted thereby is not in accord with the parties’ agreement; the losing party has not been properly informed of the tribunal’s consideration of the case and/or not given an opportunity to present a defence; or the subject matter of the dispute is not capable of being determined by arbitration, pursuant to Russian federal law (arts 8, 10, 11 and 19 of the Law on Arbitration Tribunals). A court may also refuse to enforce the arbitral award if the arbitration agreement is invalid or the award contradicts basic principles of Russian law (Commercial Procedure Code, art 239).
A party may appeal a commercial court’s decision on the enforceability of an arbitral award to a second instance court (cassational appeal) and, under certain circumstances, to the Higher Commercial Court (supervisory appeal).
A party seeking to enforce an international arbitral award issued within or outside Russia (provided the seat of the arbitration was located in a state that is party to the New York Convention) shall apply in writing to the appropriate court, attaching the duly authenticated original award (or a certified copy) together with the original arbitration agreement (or a certified copy). If the award and/or agreement are in a language other than Russian, the party shall also supply certified translation(s) into Russian. (International Arbitration Act, art 35). The grounds for refusal to enforce an award are the same as those set out in the New York Convention (International Arbitration Act, art 36).
The rules and procedures for enforcement of a domestic arbitral award are set out in the Commercial Procedure Code. The interested party shall apply to the competent state court if the losing party fails to comply with the arbitral award within the period indicated in the award. The enforcement application shall include details of the losing party and the arbitral tribunal. A certified copy of the award and documents confirming that it has entered into force, as well as evidence that the losing party was properly notified of the enforcement proceeding, should be attached to the application. The grounds for refusal to enforce a domestic arbitral award are the same as the grounds for setting it aside, as described above.
The International Arbitration Act does not expressly address the confidentiality issue but leaves to the parties to determine the level of confidentiality for the proceedings (art 19). Under the International Arbitration Act, confidentiality is not automatic. The rules of most Russian arbitral institutions, however, provide for the confidentiality of the proceedings. For example, the ICAC Rules provide that persons not participating in the proceedings may be present at the hearing only with permission of the tribunal and consent of the parties (ICAC Rules, art 27; new ICAC Rules, art 32).
With regard to domestic arbitrations, Russian law provides for confidentiality (Law on Arbitration Tribunals, art 19). The arbitral tribunal shall consider the case behind closed doors unless otherwise agreed by the parties (Law on Arbitration Tribunals, art 22). An arbitrator shall not be entitled to divulge information revealed in the course of the arbitration proceeding without consent of the parties or their legal successors. In addition, an arbitrator may not be examined as a witness with regard to information that became known to him or her in the course of an arbitration proceeding (Law on Arbitration Tribunals, art 27).
20. UNIQUE JURISDICTIONAL ATTRIBUTES Is there any particular aspect of the
20.1 approach to arbitration in the jurisdiction which bears special mention?
Russian legislation concerning commercial arbitration has developed considerably in recent years, and now meets international standards. In light of the recent developments, the court practice applying the law is still evolving, and therefore brings with it a degree of uncertainty.
