The Annual RAA conferences are becoming the largest forum on arbitration in Russia and the CIS gathering the representatives of the arbitral institutions and practitioners from all over the globe. This year the conference was very topical and focused on the contemporary challenges in arbitration related to the EU and US sanctions against Russia and the rise of Asian arbitration centers as an alternative for the Russian disputes.
Keynote speaker. On reform of arbitration in Russia.
This year’s keynote speaker was the Deputy Minister of Justice, Ms. Elena Borisenko, who is in charge of the on-going arbitration reform in Russia.
The reform attracted public attention, because the draft new law on domestic arbitration provides a great number of novelties related to the creation, existence and liquidation of the arbitration institutions in Russia, the system of assistance by the Russian state courts to the arbitral tribunals, terms of enforcement and challenge of the arbitral awards by the Russian courts, liability of arbitrators and other.
Ms. Borisenko pointed out the importance of “transparent” arbitration as part of a healthy business environment in Russia. She informed that the latest drafts and initiatives were presented to the Russian government, and a public discussion is planned during the Saint Petersburg International Legal Forum in May 2015.
First session: Arbitration in Russia.
Timur Aitkulov from Clifford Chance in his presentation told the participants of the conference about his case in the Constitutional court of Russian Federation which, as he mentioned, was wrongly described as the “case on pocket arbitration institutions” (ruling 30-П dated 18 November 2014).
The history of this case is rather interesting.
To understand its substance it is necessary to know that one of the specifics of local arbitration in Russia is existence of arbitration institutions created by Russian corporations – such as arbitration court of Gazprom, arbitration institute related to Sberbank and others (sometimes called “pocket arbitration institutions”). The Russian corporations usually insist on including arbitration clauses into their contracts referring prospective disputes to the affiliated arbitrations institutions.
The Supreme Commercial Court (before its merger with the Supreme Court) persistently fought these practices by refusing enforcement of the awards given by the tribunals under such arbitration centers (rulings № 1567/13 dated 16 July 2013, № 8445/13 dated 29 October 2013). As a ground for refusal, the court would normally use an argument that awards made by such tribunals were formed by institutions founded by one of the party to the dispute and therefore such tribunals lack impartiality.
There was a split in opinions on the issue in the legal community – some lawyers supported the position of the Supreme Commercial court, the other believed that such explanation for refusal of enforcement was too simplistic and was not always correct.
Sberbank challenged such approach by filing a claim to the Constitutional Court of the Russian Federation and received an opinion that it was not possible to refuse enforcement of all awards of such arbitration institutions without looking into details of a particular case. The Constitutional Court pointed out that in such institution there was a special procedure for appointment of arbitrators; therefore, impartiality and independence of arbitrators were preserved by the procedure and by the right of the parties to challenge the arbitrators.
Timur Aitkulov mentioned that the new approach is reflected in the draft legislation and that it is certainly to the benefit of arbitration.
Fedor Vyacheslavov from Alrud provided an overview of the current situation in the enforcement of arbitral awards in Russia.
He mentioned that in general the number of grounds for non-enforcement of the arbitral awards has been substantially reduced by Russian courts. Cases where parties invoke “public policy” as a ground for refusal are decreasing; the use of “guerilla tactics” has also shrank due to the Supreme Court’s attitude, the loosing parties have to become creative in their attempts to prevent enforcement.
Fedor provided several examples of cases in which despite the creative attempts of lawyers acting in bad-faith, the courts supported arbitration (by enforcing even questionable arbitration clauses or by enforcing arbitration awards with some procedural issues, such as service of arbitration submissions via a party’s parent company).
Alexander Besborodov from Beiten Burkhardt discussed the recent court practice regarding the arbitrability of disputes arising out of the state and municipal procurement contracts.
Alexander mentioned that the questions arose from the case of ArbatStroy (decision of the Supreme Commercial Court number 11535/13 dated 28 January 2014). In this case the Supreme Commercial Court declared that the disputes arising out of the state tenders are not domestically arbitrable. The rationale is that public contracts cannot be resolved by the private means of dispute resolution and therefore shall be referred to the state courts only. As a result, the court refused the enforcement of the arbitral award.
Alexander pointed out that this decision however did not answer a question whether such disputes can be arbitrated internationally and whether such international arbitral awards can be enforced. Limitations on selecting a suitable forum will negatively impact business environment, reduce the number of foreign contractors and undermine efficiency because in many cases the state courts’ judgments are not granted recognition and enforcement abroad.
Further, the invited top in-house counsel exchanged their opinions about the type of arbitration important for business today.
Janna Sedova from Enel Russia shared her experience regarding some technical issues to be taken into account in choosing a suitable forum, among which were the requirements for the notary witnessing of signatures of arbitrators (which was not always possible) in absence of which in some countries legalization of awards cannot be done. She also mentioned her wish that the decisions on enforcement of the awards in Russia were made by a special group of experienced judges and that a Russian competent authority collected and systemized information about the recognition and enforcement of foreign court decisions and arbitral awards in Russia and abroad.
Alevtina Kamelkova from Alcatel - Lucent informed about the increasing interest in the Asian arbitration centers and that it is important to have more information on arbitration in Aisa, such as the laws, court practice, infrastructure. She mentioned that she is aware of only a few companies which started to include arbitration clauses to the Asian arbitration centers in an attempt to diversify their risks relating to the existing and potential sanctions.
Valery Sidnev from Uralchem was honest in his statement that business was interested only in itself and in no other business, including legal business. Therefore, business will always use the most cost-effective and reasonable forums, which in the opinion of Valery, in most cases is a forum in a country where a business unit is located.
Second session: Traditional arbitration institutions and sanctions.
During the second session the lawyers and representatives of the LCIA, ICC, SCC and Swiss Chambers' Arbitration Institution discussed the sanctions and their effect on arbitration.
Jackie van Haersolte-van Hof from the LCIA offered lawyers to “try other institutions and come back to the LCIA” together with pointing attention of the participants that the LCIA also had its branches in Asia. She told the participants that the sanctions against Russian parties did not create a lot of obstacles for arbitration in the LCIA, especially comparing with obstacles arising out of American sanctions against Iran. The LCIA when receiving requests for arbitration needs to verify, whether the parties are on a sanction list, this list is updated by the LCIA from time to time, but having parties in the sanction list does not prevent them from arbitrating.
Annette Magnusson from the SCC confirmed that the institution had a similar approach and that in her opinion the sanctions have not prevented the parties from arbitrating in a selected forum, however it requires the fulfillment of several formalities – obtaining a permission from the relevant authorities, determining the payment methods (in Euro instead of US dollars, for example).
Anna Kosmenko talking about the Swiss Chamber Arbitration Institution on this occasion laid emphasis to the fact that Switzerland is a neutral country with a court system which is very friendly to arbitration and therefore with a limited number of options available for the challenging of arbitral awards.
The audience echoed with a comment that the “LCIA is too English and the Swiss Chamber Arbitration Institution is too Swiss”.
Vladimir Khvalei, as a representative of the ICC, shared his opinion that there are 4 problems regarding the sanctions: a principal ability of an institution to administer disputes between the parties affected by the sanctions (for instance the ICC as a French entity needs some clearances from the government); the arbitrators which are the EU nationals cannot be arbitrators in such cases; a principal ability of banks to transfer payments of administrative fees; potential prejudice of foreign arbitrators towards the Russian parties.
Stepan Guzey from Lidings and Eugeny Rashchevskiy from EPAM confirmed that there were already cases when several Russian banks refused to transfer administrative fees to an arbitration institution because of the sanctions and as a result the claimants had problems with bringing their claims.
The participants during the session were invited to vote and share their opinions on effect of the sanctions on their choice of forum.
The results of the voting can be found below.
Third session. New arbitration institutions.
This session was moderated by Dominic Pellew of Dentons and Vassily Rudomino from Alrud and gathered the representatives from all major Asian institutions such as the SIAC, HKIAC, CIETAC, KLRCA and DIAC.
Each speaker represented and promoted its institution discussed the specifics and advantages of the institution, including such as location, direct flights from Moscow and the Russian speaking arbitrators.
Some interesting comments on arbitration in the CIETAC were made by Aibek Ahmedov from KIAP. He noted that this institution was active in employing the principle of equity in the process of adjudicating decisions. Equity in his opinion may help to reach a fair decision, notwithstanding any foreign sanctions, and this can be an advantage of the CIETAC.
Speaking of the statistics, the present Asian institutions did not have many cases involving Russian parties so far, but they believe that the current situation will bring more cases to Asia.
The Annual Meeting of the RAA Members
The Russian Arbitration Association (RAA) was founded in 2013 by the leading law firms and individuals in the field of arbitration. The main objective of the Association is cooperation in the development of arbitration in the Russia and the CIS, promoting Russia as a venue for arbitration, promoting Russian arbitrators at national and international levels within the arbitration context, as well as promoting foreign arbitrators interested in arbitral proceedings, directly or indirectly relating to Russia and the CIS countries.
The RAA reported its 2014 results and achievements among which it UNCITRAL based Arbitration Rules enabling the RAA to administer domestic and international cases; the launch of a comprehensive online arbitrator’s database; introduction of an online platform for the resolution of small claims which will be launched later this year.
The main objectives of the Russian Arbitration Association for the years to come will be promotion of its dispute resolution capabilities, including various industry specific rules.
The members elected the new Board and the Arbitrators Nominating Committee for the next term.
Anna Grishchenkova, partner, KIAP