International arbitration law and rules in Russia

  1.  HISTORICAL BACKGROUND
  2.  SCOPE OF APPLICATION AND GENERAL PROVISIONS OF THE ICAA
    1. Subject matter
    2.  Structure of the law
    3.  General principles
  3. THE ARBITRATION AGREEMENT
    1.  Definitions
    2. Formal requirements
    3.  Special tests and requirements of the jurisdiction
    4.  Separability
    5.  Mandatory and non-mandatory provisions
  4. COMPOSITION OF THE ARBITRAL TRIBUNAL
    1.  The Constitution of the arbitral tribunal
    2. The Procedure for challenging and substituting arbitrators
    3. Arbitration fees and expenses
  5.  JURISDICTION OF THE ARBITRAL TRIBUNAL
    1.  Competence to rule on jurisdiction
    2. Power to order interim measures
  6.  CONDUCT OF PROCEEDINGS
    1.  Commencement of arbitration
    2. General procedural principles
    3. Seat, place of hearings and language of arbitration
    4. Multi-party issues
    5. Oral Hearings and Written proceedings
    6. Default by one of the parties
    7. Taking of evidence
    8. Appointment of experts
    9.  Confidentiality
    10.  Court assistance in taking evidence
  7.  MAKING OF THE AWARD AND TERMINATION OF PROCEEDINGS
    1.  Choice of law
    2. Timing, form and content of award
    3. Settlement
    4. Power to award interest and costs
    5.  Termination of the proceedings
    6.  Correction, clarification and issuance of a supplemental award
  8.  ROLE OF THE COURTS
    1.  Jurisdiction of the courts
    2.  Stay of court proceedings
    3.  Preliminary rulings on jurisdiction
    4. Interim protective measures
    5.  Obtaining evidence and other court assistance
  9.  CHALLENGING AND APPEALING AN AWARD THROUGH THE COURTS
    1.  Jurisdiction of the courts
    2.  Appeals
    3.  Applications to set aside an award
  10.  RECOGNITION AND ENFORCEMENT OF AWARDS
  11.  SPECIAL PROVISIONS AND CONSIDERATIONS
    1.  Consumers
    2.  Employment law
    3.  Real estate rights

In Russia, arbitration is not a very popular tool for dispute resolution and is rarely used to resolve domestic disputes; however, it is commonly used for international disputes with foreign counterparts. Recent arbitration reform limited the number of domestic arbitral institutions in Russia and required foreign arbitral institutions to obtain accreditation to operate in Russia, making use of arbitration even more limited.

1. HISTORICAL BACKGROUND

1.1.1 From September 1922 onwards, the newly created arbitration commissions settled commercial disputes between domestic parties and state enterprises. 1 Statute on the procedure of resolution of proprietary disputes between state institutions and enterprises, published by the All-Russian Central Executive Committee and the Council of the People's Commissars of the Russian Socialist Federated Soviet Republic, dated 21 September 1922. See Sobranie uzakoneniy i rasporyazheniy Rabochego i krestyanskogo Pravitelsva 1922, No 60, s 769.  These “arbitrazh” tribunals were neither courts, in the proper sense of the term, nor an independent arbitration system but rather quasi-judicial panels of adjudicators. 2 State arbitrazh was a process by which State-owned entities would solve their disputes. Each State arbitrazh commission was a three-member panel consisting of a lawyer, an executive member of the trade relevant to the dispute and a third-party neutral. State arbitrazh was based on the premise that all disputes should be resolved for the benefit of all State-owned enterprises.  Foreign trade disputes were resolved by arbitration under two specialised permanent arbitration bodies: the Maritime Arbitration Commission (MAC), which dealt with all maritime international trade disputes and the International Commercial Arbitration Court (ICAC), 3 ICAC has been in existence since 1932 when the Foreign Trade Arbitration Commission was set up. In 1987 it was renamed the Arbitration Court of the USSR Chamber of Trade and Commerce and in 1993 the entity became known as ICAC  which dealt with all non-maritime international trade disputes. During the Soviet era, only special state-controlled trading enterprises could engage in foreign trade. These enterprises alone had access to international arbitration.

1.1.2 In addition to this system for resolving trade disputes between Soviet foreign trade enterprises and parties from non-communist countries, the Convention on the Settlement by Arbitration of Civil Law Disputes Resulting from Relations of Economic and Scientific-Technical Cooperation (Moscow Convention) 4 Moscow Convention (adopted on 26 May 1972; in force on 13 August 1973) [http://www.jurisint.org/en/ins/161.html] (accessed 1 December 2011). introduced a compulsory international arbitration scheme for all disputes arising between state trading enterprises of the Member States of the Council for Mutual Economic Assistance (COMECON).

1.1.3 On 14 August 1993, the Law of the Russian Federation on International Commercial Arbitration (International Commercial Arbitration Act, ICAA) came into force. 5 Federal Law on International Commercial Arbitration No 5338-1 dated 7 July 1993, as amended by Federal Law No 409-FZ dated 29 December 2015.  The ICAA was introduced to make international commercial arbitation in Russia more acceptable to foreign parties, with particular regard to investment and foreign trade disputes. The ICAA is based on the internationally recognised standard of the UNCITRAL Model Law on International Commercial Arbitration (1985) (Model Law). 6  

1.1.4 On 29 December 2015, two laws – the Federal Law on Arbitration in the Russian Federation 7 Federal Law No. 382-FZ “On Arbitration in the Russian Federation” dated 29 December 2015.  (New Law on Arbitration) and the Federal Law on Amendments to Certain Legislative Acts of the Russian Federation 8 Federal Law No. 409-FZ “On Amendments to Certain Legislative Acts of the Russian Federation” dated 29 December 2015.  (Law No. 409, together – the Laws) were adopted. The New Law on Arbitration entirely replaced the former law on domestic arbitration from 2002. 9 Federal Law on Treaty (Arbitration) Courts in the Russian Federation No 102-FZ dated 24 July 2002, as amended by Federal Law No 194-FZ dated 27 July 2010 and Federal Law No 8-FZ dated 7 February 2011.  Additionally, as of 1 September 2016, it regulated domestic arbitration in the Russian Federation and, in certain aspects with regard to the ICAA, international arbitration with the seat of the arbitration in the Russian Federation. Law No. 409 significantly amended the ICAA as well as a number of other Russian laws. 

1.1.5 Their provisions, with a number of exceptions, entered into force on 1 September 2016, substantially reforming the organisation and operation of arbitration in Russia as well as amending the legislation on the judicial system of the Russian Federation. 

1.1.6 The Laws are predominantly based on the Model Law, though certain parts differ. The main innovations set by the Laws include an attempt to ban the so-called “pocket” arbitration institutions, extension of the jurisdictions of the arbitration institutions in certain categories of disputes (such as corporate disputes), strengthening co-operation of state courts with arbitration courts in the conduct of arbitration, as well as clarifications of enforcement of arbitral awards aiming to improve the overall quality of arbitration in the Russian Federation.

1.1.7 On 27 December 2018 a new series of amendments to the Law on Arbitration were adopted and came into force on 29 March 2019. Such amendments were adopted to address various problems encountered in the course of implementing the reform. Most of the amendments addressed regulations for permanent arbitration institutions and issues in respect of the arbitrability of corporate disputes. 

2. SCOPE OF APPLICATION AND GENERAL PROVISIONS OF THE ICAA

2.1 Subject matter

2.1.1 The ICAA applies to international commercial arbitrations that are seated within the Russian Federation. 10 ICAA, ch 1, art 1(1).  However, the following provisions of the ICAA also apply to disputes where the seat of the arbitration is outside the Russian Federation:

  • article 8 (stay of court proceedings in favour of arbitration);
  • article 9 (court applications for interim protective measures in support of arbitral proceedings); and
  • articles 35 and 36 (recognition and enforcement of awards).

2.1.2 The issues that are not covered by the ICAA but relate to, inter alia, establishment and operation of arbitration institutions administering international arbitration in the territory of the Russian Federation as well as other organisational issues in international arbitration with the seat in Russia, are regulated by the New Law on Arbitration. 11 Ibid, ch. 1, art 1 (2).

2.1.3 It follows from the wide definition of “arbitration” in the ICAA that the provisions apply not only in relation to ICAC or MAC-administered arbitrations, but may also be applied to ad hoc arbitrations as well as arbitrations organised under the rules of other permanent arbitration institutions. 12 ICAA, ch. 1, art 2.

2.1.4 The ICAA does not apply to purely domestic arbitrations, which are governed by the New Law on Arbitration. This chapter on Arbitration in the Russian Federation will focus primarily on international commercial arbitration under the ICAA, as currently in force. It will also highlight some important provisions of the New Law on Arbitration related to international arbitration as well as new ICAC Regulations and Rules.

2.2 Structure of the law

2.2.1 The ICAA contains the following chapters:

  1. general provisions;
  2. arbitration agreement;
  3. composition of arbitral tribunal;
  4. jurisdiction of the arbitral tribunal;
  5. conduct of proceedings;
  6. making of the award and termination of proceedings;
  7. challenging an award; and
  8. recognition and enforcement of awards.

2.2.2 The ICAA also contains two appendices: the ICAC statute 13 ICAA, appendix I.  and the MAC statute. 14 Ibid, appendix II.

2.3 General principles

2.3.1 The ICAA provides that:

  • no court interference in the arbitral process may take place except as provided for by the ICAA (principle of non-intervention by the courts); 15 Ibid, ch 1, art 5.
  • prior to their appointment, and subsequently at any stage of the arbitration, arbitrators must disclose any information that may give rise to justifiable doubts as to their impartiality or independence and they may be challenged if such doubts exist (principle of impartiality and independence of the arbitral tribunal); 16 Ibid, ch 3, art 12.
  • the parties to a dispute must be treated equally and without preference and each party must be provided with an opportunity to present its case (principle of equality of the parties, fairness and due process); 17 Ibid, ch 5, art 18.  and
  • the parties to a dispute may decide on particular issues relating to the arbitral procedure to be followed and thereby deviate from the provisions of the ICAA (where so permitted) and the New Law on Arbitration as it relates to international arbitration (where so permitted) (principle of party autonomy). 18 Ibid, ch 5, art 19.

3. THE ARBITRATION AGREEMENT

3.1 Definitions

3.1.1 The ICAA defines an arbitration agreement as:

An agreement by the parties to submit all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship (or a part thereof), whether contractual or not, to arbitration. An arbitration agreement may be in the form of an arbitration clause in the main agreement or in the form of a separate agreement. 19 Ibid, ch 2, art 7(1).

3.2 Formal requirements

3.2.1 The arbitration agreement must be in writing. 20 Ibid, ch 2, art 7(2).  The following will satisfy the formal requirement for the agreement to be in writing:

  • an agreement in the form of a document signed by the parties;
  • an exchange of letters, telexes, or other means of telecommunication that provides a record of the parties’ agreement for further use; 21 Ibid, ch 2, art 7(3).  
  • an agreement in the form of an electronic mail given that the information contained therein is available for further use and that the arbitration agreement is concluded in accordance with requirements of law for a contract entered into by means of exchange of documents via electronic form; 22 Ibid, ch 2, art 7(4).
  • an assertion by one party in its statement of claim or defence that there is an agreement between the parties to refer any dispute between them to arbitration that is not denied by the other party; 23 Ibid, ch 2, art 7(5).  
  • a reference in an agreement to a separate document containing an arbitration clause, provided that the agreement is executed in writing and that the reference to the arbitration clause in the separate document expressly makes that clause part of the underlying agreement; 24 Ibid, ch 2, art 7(6).
  • an agreement included in the rules of a trading platform or clearing rules; 25 Ibid, ch 2, art 7(7).  
  • an agreement included in the company's charters and corporate (shareholders') agreements (with a number of exceptions). 26 Ibid, ch 2, art 7(8).

3.2.2 The ICAA 27 Ibid, ch 2, art 7(13).  and the New Law on Arbitration 28 Federal Law No. 382-FZ “On Arbitration in the Russian Federation” dated 29 December 2015, art.2 (13), art 7 (12).  also stipulate that certain issues may be agreed only by way of “express agreement” of the parties. This requires that in order for such an issue to be validly agreed, the parties' agreement must be expressly set out in the text of the parties' arbitration clause, rather than addressed in the arbitration rules to which the arbitration clause refers. Issues which may be addressed only by parties' “express agreement” include:

  • excluding the possibility of referring to the state courts for assistance with formation of a tribunal and challenging the tribunal's ruling on jurisdiction in the state courts; 
  • conducting arbitration without an oral hearing; and 
  • excluding the possibility of setting aside the final award.

3.3 Special tests and requirements of the jurisdiction

3.3.1 Under the ICAA, parties may refer the following disputes to international commercial arbitration in their agreement:

  • foreign trade disputes, resulting from contractual or other civil law relationships and disputes arising from other forms of international economic relationships, if the place of business of at least one of the parties (or the place of performance of the significant part of the obligation arising from the parties' relationship or the place mostly associated with the subject matter of the dispute) is located outside of the Russian Federation; and
  • disputes arising from foreign investments in the territory of the Russian Federation or Russian investments abroad. 29 ICAA, ch 1, art 1(3).

3.3.2 Notwithstanding the wide scope of disputes outlined above, the jurisdiction of the ICAA is limited by the wider Russian legal framework and in particular by provisions of Arbitrazh Procedure Code (applicable to private commercial disputes) and by the Civil Procedure Code (applicable to non-commercial disputes involving individuals). The ICAA does not apply where specific legal provisions of the Codes prevent the use of arbitration or impose an alternative and compulsory dispute resolution method. Types of disputes that are non-arbitrable are:

  • bankruptcy (including claims against debtors after a bankruptcy is declared);
  • disputes arising from administrative and other public relations; 
  • privatisation disputes;
  • public procurement disputes;
  • disputes in relation to state and municipal property; and
  • certain types of corporate disputes (as discussed below), etc.

3.4 Separability

3.4.1 The ICAA provides that an arbitration clause that forms part of a contract shall be treated as an agreement independent of the other terms of the contract for the purposes of determining the jurisdiction of the arbitral tribunal and the validity of the arbitration agreement. The fact that the main contract may be invalid does not invalidate the arbitration clause as a matter of law. 30 Ibid, ch 4, art 16(1).  This is an important precondition for the arbitral tribunal's power to rule on its own jurisdiction. 31 See section 5.1 below.

3.5 Mandatory and non-mandatory provisions

3.5.1 The ICAA identifies non-mandatory provisions through wording such as “unless otherwise agreed by the parties” or “the parties are free to agree.” This language indicates that the parties to an arbitration agreement have the discretion to make their own arrangements on procedural matters. Express provisions in the arbitration agreement between the parties will take precedence over the non-mandatory provisions of the ICAA. However, where provisions are mandatory, the parties have no discretion to amend them or exclude their application by agreement.

3.5.2 Non-mandatory provisions include:

  • the power of the arbitral tribunal to order interim protective measures; 32 ICAA, ch 4, art 17.
  • the seat, date of the commencement and language of proceedings; 33 Ibid, ch 5, art 20-22.
  • the number and the procedure for the appointment of arbitrators; 34 Ibid, ch 3, art 10-11.  and
  • the procedure for the conduct of the arbitral proceedings provided it complies with requirements of the ICAA and the New Law on Arbitration (in part applicable to international arbitration). 35 Ibid, ch 5, art 19.  

3.5.3 In addition, the ICAA provides that where a provision of the ICAA (other than in respect of the law applicable to the substance of the dispute) affords the parties discretion to agree on a particular issue, they may authorise a third party to exercise that discretion. 36 Ibid, ch 1, art 2.  This relates, in particular, to institutional arbitration, where the parties may confer discretion on the arbitral institution (eg the right to appoint the arbitral tribunal on their behalf) by adopting the institutional rules in the arbitration agreement. The ICAA further clarifies that where the parties are free to agree on a particular issue, they may do so by incorporating specific (institutional or ad hoc) arbitration rules into their agreement by reference, which are then regarded as containing the agreement of the parties. 37 Ibid, ch 1, art 2.

4. COMPOSITION OF THE ARBITRAL TRIBUNAL

4.1 The Constitution of the arbitral tribunal

4.1.1 The ICAA provides that the parties to an arbitration agreement are free to determine the number of arbitrators. If the parties have not agreed to the number of arbitrators, three arbitrators shall be appointed. 38 Ibid, ch 3, art 10.  The ICAA also provides that, unless otherwise agreed by the parties, nationality cannot be used as grounds for disqualifying a potential arbitrator. 39 Ibid, ch 3, art 11(1).  It is therefore possible to appoint foreign nationals as arbitrators for the purpose of international arbitral proceedings in Russia.

4.1.2 The ICAA gives the parties freedom to agree on the procedure for appointing the arbitrators. 40 Ibid, ch 3, art 11(2).  If one of the parties fails to comply with the agreed procedure then the ICAA provisions regarding arbitral appointments shall apply.

4.1.3 The ICAA sets out the following appointment procedure to be followed in the absence of agreement by the parties. If the arbitral tribunal is comprised of three arbitrators, each party shall appoint one arbitrator and the two party-appointed arbitrators shall jointly appoint the third arbitrator. If a party fails to appoint its party-appointed arbitrator within 30 days of receipt of a request from the other party to do so, or if the two party-appointed arbitrators fail to agree on the appointment of the third arbitrator within 30 days of their appointment, then the competent state court will make the requisite appointment subject to the request of any of the parties. The competent state court will also make the appointment subject to the request of any of the parties if the parties fail to agree on the appointment of a sole arbitrator. 41 ICAA, ch 3, art 11(3).

4.1.4 The ICAA provides for a number of situations where the parties may fail to follow the appointment procedure, including:

  • where the parties have agreed an appointment procedure in their arbitration agreement but one of the parties does not comply with the agreed procedure;
  • where the parties, or the two party-appointed arbitrators, fail to reach agreement on the identity of the third arbitrator; or
  • where a third party (including an arbitral institution) does not fulfil the functions delegated to it in accordance with the agreed procedure. 42 Ibid, ch 3, art 11(4).

4.1.5 In these instances, any party may request that the competent state court assumes the necessary measures to complete the appointment of the arbitrators, unless the arbitration agreement provides another mechanism for securing an appointment. 43 ICAA, ch 3, art 11(4).

4.1.6 However, in cases where the arbitration is administered by an arbitration institution (ie not an ad hoc arbitration), the parties may, by means of an “express agreement”, 44 Section 3.2.2. above.  exclude the possibility of referring to state courts for assistance with formation of a tribunal. 45 Ibid, ch 3, art 11(5).  If such an agreement is reached by the parties and the circumstances outlined in section 4.1.4. above occur, the arbitration formation process is terminated and the dispute shall be forwarded to a state court for review on the merit. 

4.1.7 In appointing an arbitrator, the competent state court will have regard to the qualifications required of the arbitrator by the agreement of the parties and to such other considerations as are likely to ensure the appointment of an independent and impartial arbitrator. 46 Ibid.

4.1.8 The ICAC Regulations on Organizational Principles of Activity of ICAC (ICAC Regulations) contain general provisions on arbitrators including the requirements as to their impartiality and independence and their specialist knowledge in settling disputes. 47 ICAC Regulations, art 3(2).  ICAC maintains an approved list of arbitrators that is available on its website (in English and Russian) 48 ICAC List of Arbitrators [http://www.tpprf-mkac.ru] (as of 28 December 2017).  and may be requested in hardcopy. However, persons not included on that list may still be appointed to act as arbitrators in ICAC arbitral proceedings, unless restricted by applicable ICAC Rules of Arbitration of International Commercial Disputes (ICAC Rules). 49 ICAC Regulations, art 4(4).

4.1.9 In ICAC arbitral proceedings, the rules in relation to the formation of the arbitral tribunal are set out in chapter five of the ICAC Rules. Unless otherwise agreed by the parties, 50 The ICAC Appointing Committee also has discretion to determine whether a sole arbitrator is appropriate. To reach its decision the ICAC Appointing Committee will consider the complexity of the case, amount of the claim and other circumstances.  the ICAC Rules provide for an arbitral tribunal to consist of three arbitrators: one arbitrator appointed by each party and a chair appointed by the ICAC Appointing Committee from the list of arbitrators for international commercial disputes. 51 CAC Rules, ch 5, art 16.  The ICAC Appointing Committee has exclusive authority to appoint a chair. 

4.1.10 In addition, the ICAC Regulations provide for the nomination of a case reporter by the chair of the arbitral tribunal (or the sole arbitrator) and the appointment of the case reporter by the ICAC Executive Secretary (or his/her deputy). 52 ICAC Regulations, art 11 (1).  The function of the case reporter is to keep a record of the proceedings, closed sessions of the arbitral tribunal and execute the orders of the arbitral tribunal related to the arbitration.

4.2 The Procedure for challenging and substituting arbitrators

Challenge of arbitrators

4.2.1 Arbitrators are required to disclose any circumstances occurring prior to their appointment and throughout the arbitral proceedings that may give rise to reasonable doubts as to their impartiality or independence. 53 ICAA, ch 3, art 12(1).  Arbitrators are required to disclose circumstances such as participation in conferences sponsored by either party (or its counsel) to the arbitration. 54 See Yukos Capital S.a.r.l. v NK Rosneft, Case No KG-A40/6775-07, Federal Arbitrazh Court of the Moscow Region, 13 August 2007; the earlier decisions of the Moscow City Arbitrazh Court, Case Nos A40-4577/07-8-46 and A40-4582/07-8-47; and the subsequent decision in Case No BAC-14955/07, Supreme Arbitrazh Court, 10 December 2007.

4.2.2 Arbitrators may only be challenged if grounds exist which give rise to justifiable doubt as to their impartiality or independence or if the arbitrators do not have the qualifications required by the agreement of the parties. 55 ICAA, ch 3, art 12(2) and ICAC Rules ch 5, art 17(1).  The parties are free to agree on additional grounds for challenge to those expressed in the ICAA.

4.2.3 A party is precluded from challenging its own party-appointed arbitrator if the circumstances giving rise to the challenge were known to the party at the time of appointment. 56 ICAA, ch 3, art 12(2) and ICAC Rules ch 5, art 17(2).  

Procedure for challenging an arbitrator

4.2.4 The parties are free to agree on the procedure for the challenge of arbitrators. 57 ICAA, ch 3, art 13(1).  In the absence of an agreed procedure, the ICAA requires the challenging party to inform the arbitral tribunal of the reasons for the challenge in writing within 15 days of the constitution of the arbitral tribunal, or within 15 days of the date on which the challenging party learned of the circumstances giving rise to the right of challenge. If a challenged arbitrator does not step down voluntarily or if the other party to the arbitration objects to his/her removal, the challenge will be decided by the arbitral tribunal. 58 Ibid, ch 3, art 13(2).

4.2.5 If an arbitrator is challenged in accordance with either the procedure agreed by the parties or that provided by the ICAA and such challenge is not successful, the ICAA provides that a party may, within 30 days of receiving notice of the decision rejecting the challenge, apply to the competent state court to decide the challenge. Parties to arbitration administered by institutional arbitration can expressly exclude this option in their arbitration agreement. An application to the competent state court to decide on the challenge does not preclude the arbitral tribunal (including the challenged arbitrator) from continuing the proceedings and rendering an award. 59 Ibid, ch 3, art 13(2).

4.2.6 If an arbitrator can no longer perform their functions, or, if for any other reason an arbitrator fails to fulfil their duties, the ICAA provides that the arbitrator's mandate terminates upon resignation or if the parties agree to remove the arbitrator. 60 Ibid, ch 3, art 14(1).  If the parties fail to agree on the removal of the arbitrator and the situation remains unresolved in this regard, either party may request the competent state court to decide on the termination of the arbitrator's mandate. Parties to arbitration administered by institutional arbitration can expressly exclude this option in their arbitration agreement or agree upon a different procedure for the arbitrator's removal. 61 Ibid.  

4.2.7 The ICAA clarifies that an arbitrator may withdraw from office in the event of a challenge without such withdrawal being taken to imply acceptance by the arbitrator that the grounds for such challenge were valid. 62 Ibid, ch 3, art 14(2).

4.2.8 Under the ICAC Rules, a party may challenge an expert or interpreter on the basis of reasonable doubts as to their impartiality or independence. 63 ICAC Rules, ch 5, art 18(4).  However, the ICAC Rules provide further grounds for the termination of arbitrators' appointments, such as removal by agreement of the parties or removal by the ICAC Presidium 64 The Presidium of the ICAC consists of the President of the ICAC, his Vice Presidents for relevant types of disputes, six persons from the Lists of Arbitrators elected at the General Meeting of Arbitrators for a six-year period, as well as three persons appointed by the President of the Chamber of Commerce and Industry of the Russian Federation. The ICAC President shall act as the Chairman of the Presidium (art 4 of the Statute of the ICAC).  (upon an application of a party) for the failure to fulfil their duties. 65 Ibid, ch 5, art 19.  

Substitution of arbitrator(s)

4.2.9 In the event that an arbitrator's mandate is terminated, the ICAA requires that the appointment of a substitute arbitrator is made in accordance with the same procedure used to appoint the arbitrator being replaced. 66 ICAA, ch 3, art 15.

4.2.10 For arbitrations under the ICAC Rules, an arbitrator whose mandate is terminated shall be replaced by the respective reserve arbitrator (if any). In the event that no reserve arbitrator is available, the replacement arbitrator will be appointed in accordance with the ICAC Rules. 67 ICAC Rules, ch 5, art 19(1).  The ICAC Rules further provide that the ICAC Presidium has discretion to order to continue with the remaining tribunal if the replacement is sought after the end of the hearings. The ICAC Presidium will take into account the circumstances of the case, the opinions of the arbitrators and the opinion of the parties prior to making its decision. 68 Ibid, ch 5, art 19(3).

4.3 Arbitration fees and expenses

4.3.1 The ICAA does not address arbitrators' fees and expenses. In ad hoc arbitral proceedings, these are matters for agreement between the parties and the arbitrators. In institutional arbitral proceedings, the amount and procedure for payment of the arbitration fees will be set out in the rules and cost schedules of the relevant arbitral institution.

4.3.2 The ICAC Rules and ICAC Schedule of Arbitration Fees and Costs set out detailed provisions for fees in relation to: the amount of the registration and arbitration fees, the procedure for their payment, their allocation between the parties and the procedure for covering the other costs of the arbitral proceedings. 69 Ibid, ch 2, art 8 and the Schedule of Arbitration Fees and Costs.  

4.3.3 The registration fee in ICAC arbitral proceedings is currently a fixed fee of USD 1,000. 70 ICAC Rules, Schedule of Arbitration Fees and Costs, art 2.  The arbitration fees, which cover the general expenses of ICAC, the Secretariat and the arbitrators' fees, are calculated on a sliding scale that depends primarily on the value of the claim and that of any counterclaim. The ICAC Schedule of Arbitration Fees and Costs provide for different fee amounts depending on the currency of the claim. Accordingly, any claim expressed in Russian Roubles will apply Rouble fees. However, if a claim is expressed in a currency other than Russian Roubles, the arbitration fee will be expressed in USD. By way of example, an arbitration fee of USD 3,000 shall be charged if the value of a claim does not exceed USD 10,000 whereas arbitration fees for claims in excess of USD 10,000,000 will be the sum of USD 90,500, plus 0.14% of the amount over USD 10,000,000.

5. JURISDICTION OF THE ARBITRAL TRIBUNAL

5.1 Competence to rule on jurisdiction

5.1.1 Under both the ICAA and the ICAC Rules, an arbitral tribunal has the power to rule on its own jurisdiction including any objections to the existence or the validity of the arbitration agreement. 71 ICAA, ch 4, art 16(1) and ICAC Rules, ch 1, art 2(4).  The ICAA requires that objections to the arbitral tribunal's jurisdiction must be raised no later than the submission of the statement of defence on the merits regardless of whether the objecting party has appointed or participated in the appointment of an arbitrator. 72 ICAA, ch 4, art 16(2).  

5.1.2 Equally, any argument that the arbitral tribunal is exceeding the scope of its authority should be raised as soon as the arbitral tribunal exceeds the scope of its authority. 73 Ibid.  An arbitral tribunal may, however, admit an objection later if it considers the delay in raising the objection justified. 74 Ibid.  If a challenge to jurisdiction is not made during the course of the arbitral proceedings, an application to set aside a resulting award may be dismissed. 75 See OOO Intercare v Berlin-Chemie/Menarini Pharma GmbH, Case No KG-A40/6468-08, Federal Arbitrazh Court of the Moscow Region, 31 July 2008; and the earlier decision in the proceedings Case No A40-4877/08-40-44, Moscow City Arbitrazh Court, 19 May 2008.  

5.1.3 An arbitral tribunal may rule on the challenge to its jurisdiction either as a preliminary issue by an award on jurisdiction or in its final award on the merits. 76 ICAA, ch 4, art 16(3).  If the arbitral tribunal determines the issue of jurisdiction by an interim award, either party may, within 30 days of receipt of notice of the ruling, request the competent court to rule on jurisdiction. Parties to arbitration administered by an institutional arbitration can expressly exclude this option in their arbitration agreement. An application to the competent state court to decide on the jurisdiction of the arbitration does not preclude the arbitral tribunal from continuing the proceedings and rendering an award. 77 Ibid.  

5.2 Power to order interim measures

5.2.1 The ICAA provides that, unless otherwise agreed by the parties, the arbitral tribunal may at the request of either party order interim measures of protection that it deems necessary for securing the claim concerning the subject matter of the proceedings. The arbitral tribunal may require any party to provide adequate security in connection with such measures. 78 Ibid, ch 4, art 17.

5.2.2 The ICAC Rules contain similar provisions. In particular, at the request of either party, the arbitral tribunal may order such interim measures to secure the subject matter of the claim as it deems necessary. 79 ICAC Rules, ch 6, art 34(1).  Such an order may take the form of an interim award. 80 Ibid, ch 6, art 34(3).  The arbitral tribunal may request a party to provide appropriate security in connection with such measures. 81 ICAC Rules, ch 6, art 34(2).  

6. CONDUCT OF PROCEEDINGS

6.1 Commencement of arbitration

6.1.1 Subject to the agreement of the parties, arbitral proceedings in respect of a particular dispute are deemed to commence on the date on which the respondent receives the claimant's request for arbitration. By comparison, under the ICAC Rules, an arbitration will commence at the time the claimant files its statement of claim. 82 ICAC Rules, ch 3, art 8(1).  In ICAC arbitral proceedings, the actual date of commencement is either the date on which the statement of claim is delivered to ICAC or, if sent by post, the date on which the statement of claim is recorded as having been posted. 83 Ibid, ch 3, art 8(2).  

6.2 General procedural principles

6.2.1 The two key procedural principles under the ICAA are that:

  1. the parties shall be treated equally (without preference) and each party shall be given a full opportunity to present its case; 84 ICAA, ch 5, art 18.  and
  2. subject to the mandatory provisions of the ICAA, the parties have autonomy to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. In the absence of such agreement, the arbitral tribunal may, subject to the mandatory provisions of the ICAA, conduct the proceedings in a manner it considers appropriate. 85 Ibid, ch 5, art 19.  

6.2.2 Under the ICAC Rules, the parties are free to agree on the procedure of the arbitration. However, if such agreement is not reached, the arbitral tribunal shall conduct the proceedings in such a manner as it considers appropriate, ensuring that the parties are treated equally and that each party is given a fair opportunity to protect its interests. 86 ICAC Rules, ch 6, art 26(2).

6.3 Seat, place of hearings and language of arbitration

Seat and place of arbitration

6.3.1 Under the ICAA, the parties are free to agree on the seat of the arbitration. Failing such agreement, the seat of the arbitration shall be determined by the arbitral tribunal, taking into account the circumstances of the case and the convenience of the parties. 87 ICAA, ch 5, art 20(1).

6.3.2 The ICAC Rules provide that the seat of the arbitration shall be Moscow, although the parties or the arbitral tribunal may agree to hold hearings and other sessions in a place other than Moscow with the agreement of the ICAC Executive Secretary. 88 ICAC Rules, ch 6, art 21(3).  

Language of arbitration

6.3.3 Parties may agree on the language or languages to be used in the proceedings. 89 ICAA, ch 5, art 22(1).  In the absence of such agreement, the arbitral tribunal shall determine the language or languages to be used. Such agreement or determination shall, unless provided otherwise, apply to any written/oral submissions made by the parties, to any hearings and any awards, decisions or other communications by the arbitral tribunal. 90 Ibid.

6.3.4 The ICAA provides that the arbitral tribunal may, in appropriate circumstances, order that any documentary evidence submitted by the parties be accompanied by a translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal. 91 Ibid, ch 2, art 22(2). The arbitral tribunal is not obliged to order the translation of documents into the language of the arbitration and the Constitutional Court of the Russian Federation has held that documents in a language other than the language of the arbitration do not prejudice any of the constitutional rights of a party, provided that the arbitral tribunal does not object to such documents. 92 See Claim of OOO Voshod, Case No 1310-0-0, Constitutional Court of the Russian Federation, 19 October 2010.

6.3.5 Although Russian is the default language of proceedings under the ICAC Rules, the parties are free to agree on a different language. 93 ICAC Rules, ch 6, art 22(1).  Furthermore, the ICAC Rules provide that documents (excluding written evidence) submitted by the parties in the arbitral proceedings shall be either in the language of: the arbitration; the contract; or the correspondence between the parties. Written evidence shall be submitted in the language of the original document. 94 Ibid. ch 6, art 22(2).  Like the ICAA, the ICAC Rules permit ICAC (whether of its own volition or at the request of a party) to request that documents submitted in a language other than the language of the arbitration are translated at the expense of the party submitting such documents. 95 Ibid.

6.4 Multi-party issues

6.4.1 The ICAC Rules contain an express provision for the joinder of third parties to the arbitral proceedings. Such joinder is possible only with the consent of the parties and the written consent of the third party proposed to be joined to the proceedings. The request for joinder of a third party must be made before the deadline for the submission of the respondent's defence. 96 ICAC Rules, ch 4, art 14.

6.4.2 The ICAA contains no express provision on the participation of third parties in the proceedings. It follows that joinder of third parties will only be possible if all parties agree to do so, whether in ad hoc or ICAC arbitral proceedings.

6.5 Oral Hearings and Written proceedings

6.5.1 The ICAA provides that, subject to any contrary provision in an arbitration agreement, the arbitral tribunal has the authority to decide whether to hold oral hearings for the presentation of evidence or oral argument or whether the proceedings should be conducted only on the basis of written submissions and other materials submitted by the parties. 97 ICAA, ch 5, art 24(1).  However, the arbitral tribunal shall hold an oral hearing at relevant stages of the arbitration upon the request of a party to the arbitration, subject only to contrary provisions of the arbitration agreement. 98 Ibid.  The ICAA requires that the parties are given sufficient advance notice of any hearing (including procedural hearings) and of any meeting of the arbitral tribunal for the purpose of taking evidence. 99 Ibid, ch 5, art 24(2).

6.5.2 Under the ICAC Rules, the default rule is that the arbitral tribunal shall hold a hearing to enable the parties to present and argue their case in the light of the evidence presented in the proceedings. 100 ICAC Rules, ch 6, art 30(1). The ICAC Rules also require that the parties are notified of the place and time of a hearing so as to afford them at least 20 days to prepare for and appear at the hearing. 101 Ibid, ch 6, art 30(2).  However, the parties may agree on shorter notice periods. The arbitral tribunal may hold further hearings if the circumstances so require. 102 Ibid, ch 6, art 30(3).  In ICAC arbitral proceedings the parties may, however, choose to waive their right to an oral hearing such that the arbitral proceedings are conducted solely on written submissions. 103 Ibid, ch 6, art 31.

6.5.3 Although the ICAA does not require the arbitral tribunal to keep formal minutes of the arbitral proceedings, the ICAC Rules provide that minutes of arbitration hearings must be kept and that such minutes must contain a description of the proceedings at the hearing. 104 Ibid, ch 6, art 33(1).  Both parties have the right to review these minutes.

6.6 Default by one of the parties

6.6.1 Unless otherwise agreed by the parties, under the ICAA, default by a party occurs in the following circumstances:

  • where the claimant fails to submit its statement of claim within the time period agreed by the parties or determined by the arbitral tribunal, in which case the arbitral tribunal must terminate the proceedings;
  • where the respondent fails to submit its statement of defence within the time period agreed by the parties or as determined by the arbitral tribunal, in which case the arbitral tribunal shall continue the proceedings without treating such failure in itself as an admission by the respondent of the claimant's allegations; and
  • where a party fails to appear at a hearing or to produce documentary evidence, in which case the arbitral tribunal may continue the proceedings and make an award on the basis of the evidence before it. 105 ICAA, ch 5, art 25.

6.6.2 Equally, the ICAC Rules provide the arbitral tribunal discretion to continue the proceedings and make an award in the event that a party who has been duly notified of the hearing fails to appear. 106 ICAC Rules, ch 6, art 30(4).  However, the ICAC Rules also permit a defaulting party to request in writing that the arbitral tribunal adjourns the proceedings for good reason. 107 Ibid.  

6.7 Taking of evidence

6.7.1 The ICAA contains only limited provisions on the subject of evidence. Generally, each party is required to prove the facts on which it relies in support of its claim or defence by the usual means of evidence, which include: documents; real evidence (eg sample goods); witness evidence; and expert opinions.

6.7.2 The ICAA provides that, unless otherwise agreed by the parties, the arbitral tribunal has the power to determine the admissibility, relevance, materiality and weight of the evidence submitted by the parties. 108 ICAA, ch 5, art 19(2).  Furthermore, any documents, statements or other information provided by one party to the arbitral tribunal must be communicated to the other party. 109 Ibid, ch 5, art 24(3).

6.7.3 The ICAC Rules expressly require that each party prove the circumstances on which it relies in support of its pleaded case. The arbitral tribunal may request a party to submit additional evidence. The arbitral tribunal may also, at its discretion, order the conduct of an expert examination, request the submission of evidence by third parties and summon and hear witnesses. 110 ICAC Rules, ch 6, art 29(1).  In ICAC arbitrations, the arbitrators are free to evaluate the evidence at their discretion. 111 Ibid, ch 6, art 29(3).  

6.7.4 The ICAC Rules further state that all documents submitted to ICAC by one party to the arbitration should be sent by the ICAC Secretariat to all other parties. The parties shall also receive expert reports and other documentary evidence on which the award may be based. 112 Ibid, ch 3, art 10(1).  

6.8 Appointment of experts

6.8.1 The ICAA contains provisions specifically dealing with experts appointed by the arbitral tribunal. 113 ICAA, ch 5, art 26.  Unless otherwise agreed by the parties, an arbitral tribunal has the power to:

  • appoint one or more experts to report to it on specific issues determined by the arbitral tribunal; and
  • require that a party provide the tribunal-appointed expert with any relevant information or to produce (or provide access to) documents, goods or other property for inspection. 114 Ibid, ch 5, art 26(1).  

6.8.2 The ICAA also provides that, unless otherwise agreed by the parties, a tribunal-appointed expert shall, after delivery of his report and at the request of a party (or if the arbitral tribunal considers it necessary), participate in a hearing where the parties have the opportunity to put questions to the said expert or present their own expert witnesses to give evidence on the points in issue. 115 Ibid, ch 5, art 26(2).

6.9 Confidentiality

6.9.1 The ICAA does not contain an express confidentiality provision. In ICAC proceedings, however, there is an obligation on the arbitrators, case reporter, experts and ICAC Secretariat to keep confidential any information that they become aware of by virtue of the arbitral proceedings. 116 ICAC Rules, ch 8, art 45 (3).  Importantly, unless otherwise expressly agreed by the parties, this obligation of confidentiality extends to the parties in dispute.

6.10 Court assistance in taking evidence

6.10.1 The ICAA allows the arbitral tribunal or a party to an arbitration (with the approval of the arbitral tribunal) to request assistance from a competent court in the Russian Federation in taking evidence. The court may execute the request, in accordance with its rules on taking evidence. 117 ICAA, ch 5, art 27.  

7. MAKING OF THE AWARD AND TERMINATION OF PROCEEDINGS

7.1 Choice of law

7.1.1 In 2002, the third part of the Russian Civil Code containing rules on conflict of laws (Civil Code) was introduced. 118 The third part of the Civil Code was adopted by Federal Law No 146-FZ dated 26 November 2001 and came into force on 1 March 2002.  The Civil Code provides rules for defining the governing law where relations involve a “foreign element”. 119 Civil Code, part 3, art 1186.  Under the Civil Code, the relevant existing legislation is used to establish the governing law to be applied by international commercial arbitrators (ie Russian international treaties and the ICAA). 120 Ibid.  Furthermore, the Civil Code defines the procedure for construction of foreign law and sets out the principal conflict of laws rules.

7.1.2 The ICAA sets out how the arbitral tribunal is to determine the law applicable to the substance of the dispute. 121 ICAA, ch 6, art 28.  It requires the arbitral tribunal to decide the dispute in accordance with the law chosen by the parties as applicable to the substance of their dispute. Any reference to the law or legal system of a state shall be construed as directly referring to the substantive law of that state and not to its conflict of laws rules. 122 Ibid, ch 6, art 28(1).  

7.1.3 In the absence of a choice of law by the parties, the arbitral tribunal shall apply the law determined by it in accordance with the conflict of laws rules which it considers applicable. 123 Ibid, ch 6, art 28(2).  The arbitral tribunal may decide to apply the conflict of laws rules from the Civil Code. Under the Civil Code, should the parties fail to choose the governing law, the law of the country where a main executor under a contract is located shall be applied. 124 Civil Code, part 3, art 1211.  

7.1.4 This introduces an element of uncertainty for the parties, as their substantive rights and obligations may differ substantially depending on the applicable law. It is therefore always preferable for the parties to include an express choice of law provision in their agreement. Doing so will, to the greatest possible extent, better enable the parties (or the appointing authority) to identify and appoint arbitrators with the requisite legal knowledge from the outset of the proceedings.

7.1.5 The ICAA also requires the arbitral tribunal to decide the matter in accordance with the terms of the underlying agreement between the parties. The arbitral tribunal should take into account the trade customs applicable to the particular transaction in the arbitration. 125 ICAC Rules, ch 6, art 23(3).

7.2 Timing, form and content of award

7.2.1 The ICAA provides that an award shall be made in writing and shall be signed by the arbitrator(s). If the arbitral tribunal consists of more than one arbitrator, the signatures of a majority of the arbitrators will suffice, provided that an explanation is provided for the omission of any signatures. The award must state the reasons on which it is based, whether the claim is allowed or disallowed, the amount of the arbitration fees and costs and their allocation between the parties. 126 Ibid, ch 6, art 31(2).  The ICAA further requires the award to be dated and to state the seat of arbitration as agreed by the parties or determined by the arbitral tribunal. 127 Ibid.  The award will be deemed to have been made at that seat. The parties shall receive a signed copy of the award. 128 Ibid, ch 6, art 31(4).

7.2.2 The ICAC Rules allow the arbitral tribunal to declare the proceedings closed and proceed to making an award when all the facts relating to the dispute have been sufficiently clarified. The award shall be made in a closed session of the arbitral tribunal and decided by a majority of votes. If a majority cannot be reached, the chair of the arbitral tribunal shall make the award. 129 ICAC Rules, ch 7, art 36.  The ICAC Rules also provide for content of the award in detail (ie indicating the list of requisites and structure to be adopted). 130 Ibid, ch 7, art 39.

7.3 Settlement

7.3.1 If the parties settle their dispute in the course of the arbitral proceedings, both the ICAA 131 ICAA, ch 6, art 30(1).  and the ICAC Rules 132 ICAC Rules, ch 7, art 39(1).  require that the arbitral tribunal terminates the proceedings and, if requested by the parties (without the objection from the arbitral tribunal), record the settlement in the form of an award on agreed terms. The ICAA and the ICAC Rules provide further clarification that an award on agreed terms shall state that it is an award and comply with the usual requirements as to form and content of an award. 133 ICAA, ch 6, art 30(2) and ICAC Rules, ch 7, art 39 (2).  An award on agreed terms has the same status and effect as an award on the merits of the case.

7.4 Power to award interest and costs

7.4.1 Under the ICAA the fees and costs of the arbitration must be assessed and allocated as between the parties in a costs order forming part of the award. 134 ICAA, ch 6, art 31(2).  Currently, there is no established practice in ad hoc arbitral proceedings pursuant to which the winning party may claim reimbursement of all or part of its legal costs and other expenses. However, arbitral tribunals will, in practice, exercise their discretion in relation to such claims upon an application of a party and may make an award for reimbursement of costs and expenses.

7.4.2 By contrast, in ICAC proceedings the arbitration fees and other additional costs (such as expert witness or translators' fees, travelling expenses, etc.) shall be borne by the losing party 135 ICAC Rules, Schedule of Arbitration Fees and Costs, art 8(1).  or, if a claim or counterclaim succeeds only in part, apportioned between the parties pro rata depending upon their respective success or failure. 136 Ibid, art 8(2).  In addition, the winning party is entitled to reimbursement of its reasonable legal costs and expenses (including the cost of legal representation) from the losing party. 137  Ibid, art 11.  

7.4.3 The ICAC Rules also require that the arbitral tribunal includes in its award the amount of the arbitration costs and fees in the case and the apportionment of such costs as between the parties. 138 ICAC Rules, ch 7, art 37.  

7.5 Termination of the proceedings

7.5.1 Under the ICAA, the arbitral proceedings are terminated either by a final award or by an order of the arbitral tribunal. 139 ICAA, ch 6, art 32(1).  Furthermore, the arbitral tribunal is required to make an order terminating the arbitral proceedings when:

  • the claimant withdraws its claim, unless the respondent objects and the arbitral tribunal recognises that the respondent has a legitimate interest in obtaining a final settlement of the dispute;
  • the parties agree to terminate the proceedings; or
  • for any other reason, the arbitral tribunal finds that the continuation of the proceedings has become unnecessary or impossible. 140  Ibid, ch 6, art 32(2).

7.5.2 Although the arbitral tribunal's mandate will be terminated, it will nevertheless have the authority to correct or interpret the award, make an additional award or resume proceedings where, in setting aside proceedings before the Russian courts, a matter is referred back to the arbitral tribunal. 141 Ibid, ch 6, art 32(3).

7.5.3 The ICAC Rules similarly provide for the termination of the proceedings through the final award on the merits. Alternatively, the arbitral tribunal may issue an order for termination of the proceedings, although, it must comply with the same requirements as a final award on the merits. 142 ICAC Rules, ch 7, art 36 and 43.

7.6 Correction, clarification and issuance of a supplemental award

7.6.1 Under the ICAA, each party may (within 30 days of receipt of the award) 143 The parties may set a different time limit.  request that the arbitral tribunal corrects any errors in computation, any clerical or typographical errors, or any errors of a similar nature. 144 ICAA, ch 6, art 33(1).  If so agreed by the parties, the arbitral tribunal may also provide an interpretation on a specific point or part of the award. The request for correction or interpretation of the award must be made with notice to the other party within 30 days of receipt of the full version of the arbitral award (unless other term agreed by the parties to the arbitration0029. The ICAA also empowers the arbitral tribunal to correct an award on its own initiative within 30 days of the date of the award. 145 Ibid, ch 6, art 33(2).  

7.6.2 If the arbitral tribunal considers the request to be justified, it shall make the correction or give the interpretation within 30 days of receipt of the request. Any such correction or interpretation shall form part of the original award. 146 Ibid, ch 6, art 33(1).  The ICAA gives the arbitral tribunal discretion to extend the time period within which to make the correction, interpretation or supplemental award, if necessary. 147 Ibid, ch 6, art 33(4).  

7.6.3 Unless otherwise agreed by the parties, each party also has the right (within 30 days of receipt of the award) to request that the arbitral tribunal makes a supplemental award on claims presented in the arbitral proceedings but omitted from the award. 148  Ibid, ch 6, art 33(3). The request must be made with notice to the other party. If the arbitral tribunal considers the request to be justified, it shall render a supplemental award within 60 days.

7.6.4 The rules as to the form and content of the award also apply to the correction or interpretation of the original award or to a supplemental award. 149  Ibid, ch 6, art 33(6).

7.6.5 The ICAC Rules provide for the correction, interpretation or making of a supplemental award in ICAC arbitral proceedings. 150 ICAC Rules, ch 7, art 41.  These rules are similar to the provisions of the ICAA, with only minor differences on the timing. 151 Under the ICAC Rules, either party can apply for the correction of an award within a reasonable time rather than the 30 days prescribed by the ICAA.

8. ROLE OF THE COURTS

8.1 Jurisdiction of the courts

8.1.1 The ICAA highlights the important principle of non-intervention by the courts (ie that the courts shall not intervene in arbitral proceedings except where expressly permitted by the ICAA). 152 ICAA, ch 1, art 5.

8.1.2 The ICAA confers authority for the exercise of most functions in support of the arbitral process to the competent state courts unless a different position is established by the ICAA. 153 Ibid, ch 1, art 6.  The options for court assistance set by the ICAA and the New Law on Arbitration are to ensure the effectiveness of arbitration as a dispute resolution mechanism.

8.2 Stay of court proceedings

8.2.1 The ICAA requires a court to stay any court proceedings at the request of a party, if the subject matter of the court claim is subject to an arbitration agreement. However, the court is not required to stay proceedings if it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. Any request by a party to stay court proceedings on the aforementioned ground shall be made no later than when the relevant party submits its first statement to the court on the substance of the dispute. 154 Ibid, ch 2, art 8(1).

8.2.2 The ICAA further provides that arbitral proceedings may be commenced or continued notwithstanding any court proceedings. An award may also be made prior to the decision of the court on jurisdiction. 155 ICAA, ch 2, art 8(2).

8.3 Preliminary rulings on jurisdiction

8.3.1 If, contrary to a party's plea, the arbitral tribunal makes a preliminary ruling that it has jurisdiction, 156 Ibid, ch 4, art 16.  the complaining party will have the right to request (within 30 days of having received notice of that ruling) a competent court to rule on the issue of jurisdiction. Parties to arbitration administered by institutional arbitration can expressly exclude this option in their arbitration agreement. An application to the competent state court to decide on the jurisdiction of the arbitration does not preclude the arbitral tribunal from continuing the proceedings and rendering an award. 157 Ibid, ch 4, art 16(3).

8.3.2 Furthermore, the court will determine the issue of jurisdiction if court proceedings are commenced and the other party invokes an arbitration agreement regarding the subject matter of the court proceedings. 158  Ibid, ch 2, art 8(1). The court may proceed with litigation only if the arbitration agreement is null and void, inoperative or incapable of being performed.

8.4 Interim protective measures

8.4.1 Although the arbitral tribunal has the power to order interim measures (unless otherwise agreed by the parties), 159 ICAA, ch 4, art 17.  the ICAA clarifies that it is not prohibited for a party to request a court (at any stage of the proceedings) to order interim measures of protection, or, for a court to grant such measures. 160 Ibid, ch 2, art 9.  The court will decide in accordance with the general principles of Russian procedural law whether to grant interim protective measures in support of an arbitration claim.

8.4.2 In ICAC arbitral proceedings, the ICAC Rules provide that if a party has requested a competent court to order interim protective measures and the court has granted such measures, then that party shall immediately inform ICAC of such measures. 161 ICAC Rules, ch 6, art 34(5).

8.5 Obtaining evidence and other court assistance

8.5.1 An arbitral tribunal within arbitration administered by an arbitration institution (ie not an ad hoc arbitration), or a party to such arbitration with the consent of the arbitral tribunal, may request the competent state court to provide assistance in obtaining evidence for use in the arbitral proceedings. 162 ICAA, ch. 5, art. 27.  The court may execute such a request on the basis of the general Russian procedural rules on taking and securing evidence. 

9. CHALLENGING AND APPEALING AN AWARD THROUGH THE COURTS

9.1 Jurisdiction of the courts

9.1.1 Russian procedural law provides that state courts have jurisdiction to consider applications to set aside awards made in Russia.

9.1.2 The procedures for challenging and enforcing awards were updated as the new procedural codes took effect. On 1 September 2002, the new Commercial (Arbitrazh) Procedure Code 163 Implemented by Federal Law No 95-FZ dated 24 July 2002.  came into force, followed by the new Civil Procedure Code on 1 February 2003. 164 Implemented by Federal Law No 138-FZ dated 14 November 2002.  The Commercial Procedural Code governs proceedings at the state commercial (arbitrazh) courts, which generally hear business-related disputes, whereas the Civil Procedural Code regulates proceedings in the common courts, typically relating to disputes concerning individuals. Common courts also have jurisdiction over certain economic disputes provided they do not fall within the jurisdiction of the state commercial courts.

9.1.3 The commercial court decisions are typically made at the first level commercial courts or third level (Federal District) commercial courts. 165 The reason for not including an intermediary level of appellate court is due to a procedural peculiarity. An initial arbitration-related claim (eg enforcement) should be filed with the first level courts but an appeal to any decision of a first level court should be filed directly with a federal level court.  However, it is not uncommon for a number of arbitration-related decisions to reach the highest level (Supreme Court) for an ultimate ruling.

9.1.4 The new codes now contain detailed regulations for challenging and enforcing domestically rendered arbitration awards and recognition and enforcement of foreign arbitration awards.

9.1.5 Under article 232 of the Commercial Procedural Code, a foreign arbitration award may be challenged on the grounds set out by an international treaty or the ICAA.

9.2 Appeals

9.2.1 Recourse to a competent state court against an arbitration award may be made only through an application for setting the award aside in accordance with the provisions of the ICAA. However, parties to arbitration administered by institutional arbitration can expressly agree in the arbitration agreement that the award is final. Final arbitration awards cannot be appealed. 166 ICAA, ch. 7, art. 34 (1).  

9.3 Applications to set aside an award

9.3.1 An award may only be set aside if the party making the application brings evidence that:

  • one of the parties to the arbitration agreement was under some legal incapacity, or the arbitration agreement was invalid under the law chosen by the parties as the governing law of the agreement, or, in the absence of such choice, under the laws of the Russian Federation;
  • a party was not given proper notice of the appointment of an arbitrator, or of the arbitral proceedings, or was for some other reasons unable to present its case;
  • the award was made with respect to a dispute which is not covered by the arbitration agreement, or does not fall within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the arbitration agreement; however, if the decision 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;
  • the constitution of the arbitral tribunal or the arbitral procedure was inconsistent with the arbitration agreement between the parties (unless such agreement was in conflict with a mandatory provision of the ICAA), or in the absence of an agreement, was not in accordance with the provisions of the ICAA; 167 ICAA, ch 7, art 34(2) (1).  or

If the court finds that:

  • the subject matter of the dispute was not capable of settlement by arbitral proceedings under the laws of the Russian Federation; or
  • the award is inconsistent with the public policy of the Russian Federation. 168  Ibid, ch 7, art 34(2) (2).

9.3.2 The ICAA provides that an application for setting aside an award must be made within three months of the date of receipt of the award by the party making the application. If a request for correction, interpretation or for a supplemental award has been made to the arbitral tribunal, the three-month time period commences from the date the request has been disposed of by the arbitral tribunal (by rejecting the request or by making the correction, interpretation or supplemental award). 169 Ibid, ch 7, art 34(3).  

9.3.3 Furthermore, at the request of any of the parties, the court has discretion to suspend the setting aside proceedings in appropriate circumstances and for a specified period of time in order to provide the arbitral tribunal with an opportunity to resume the arbitral proceedings or to take such other steps as may remove the grounds for setting aside the award. 170 Ibid, ch 7, art 34(4).

10. RECOGNITION AND ENFORCEMENT OF AWARDS

10.1.1 The ICAA does not draw a distinction between the recognition and enforcement of domestic and foreign awards or the grounds on which recognition or enforcement may be refused.

10.1.2 The ICAA provides that regardless of the country in which the award was rendered, the award shall be recognised as binding and, upon application in writing to the competent court, shall be enforced in Russia. 171 Ibid, ch 7, art 35(1).  The ICAA requires the application to be supported by the authenticated original award and arbitration agreement or by certified copies thereof. If either of these documents is made in a foreign language, certified translations into Russian must also be provided. 172 Ibid, ch 7, art 35(2).

10.1.3 Recognition and enforcement of an award may only be refused on the grounds which correspond to the grounds on which an award may be set aside, namely:

  • one of the parties to the arbitration agreement was under some legal incapacity, or the arbitration agreement was invalid under the law chosen by the parties as the governing law of the agreement, or, in the absence of such choice, under the laws of the country where the award was made; 173 ICAA, ch 7, art 36(1) (1).
  • the party against whom the award was made was not given proper notice of the appointment of an arbitrator, or of the arbitral proceedings, or was for some other reason unable to present its case;
  • the award was made with respect to a dispute which was not covered by the arbitration agreement, or does not fall within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the arbitration agreement; however, if the decision on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced;
  • the constitution of the arbitral tribunal or the arbitration procedure was inconsistent with the arbitration agreement between the parties, or, in the absence of an agreement, was not in accordance with the laws of the country where the arbitration took place; or
  • the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which (or under the laws of which) that award was made; 
  • if a competent court finds either that the subject matter of the dispute was not capable of settlement by arbitral proceedings under the laws of the Russian Federation; or 
  • that the award is inconsistent with the public policy of the Russian Federation. 174 Ibid, ch 7, art 36(1) (2).

10.1.4 The Commercial Procedural Code contains a rule that foreign court decisions and awards are to be recognised and enforced in Russia if one of Russia's international treaties or federal laws requires it. Russia is a signatory to the New York Convention 175 For the full text of the New York Convention (1985) see https://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/New-York-Convention-E.pdf.  and the 1961 European Convention. Therefore, recognition and enforcement of foreign awards in Russia is conducted in accordance with these conventions. It is more difficult to enforce or seek recognition of foreign commercial judgments (than awards) due to the fact that Russia has still not ratified or entered into bilateral treaties for enforcement of foreign commercial judgments with some leading economies (eg Great Britain, the USA, Canada, etc.). This is yet another reason for referring disputes to international arbitration rather than to the courts of the relevant foreign state.

10.1.5 The ICAA provides that if a local court, in the country in which an award is granted, receives an application to set aside or suspend that award, then the court where recognition or enforcement is sought may, if appropriate, adjourn its decision until the challenge has been heard. Alternatively, it may also order the party seeking to set aside or suspend an award to provide security upon application by the party seeking recognition or enforcement of the award. 176 ICAA, ch 7, art 36(2).

10.1.6 Respective case law has highlighted that a respondent may not object to the jurisdiction of the Russian courts in enforcing an arbitral award on the grounds of invalidity of the award, unless an application to set aside the award has been made. 177 See Odfjell SE v. JSC PO Sevmash, Case No A05-10560/2010, Federal Commercial District Court for the North West, 10 March 2011; Living Consulting Group AB v. LLC Sokotel, Case No A56-22667/2010, Federal Commercial District Court for the North West, 29 April 2011; and Hipp GmbH & Co Export KG v. LLC SIVMA Detskoye Pitanie, and CJSC Sivma, Case No BAC-1787/11, Supreme Arbitrazh Court, 4 April 2011.  Therefore the application to set aside an award shall be made as soon as feasible to the competent court. Russian courts shall adjourn hearings of the enforcement claim until the challenge has been heard.

11. SPECIAL PROVISIONS AND CONSIDERATIONS

11.1 Consumers

11.1.1 Consumers in Russia may not use international arbitration to resolve consumer disputes.

11.2 Employment law

11.2.1 Russian legislation provides that employment disputes must be decided by an employment commission or a state court, not by arbitration.

11.3 Real estate rights

11.3.1 The New Law on Arbitration contains an important reservation with regards to arbitral awards: no arbitral award (regardless of whether it was rendered within domestic arbitration or international arbitration) can be a basis for recording the emergence, change or termination of civil rights and obligations in a state register (including, inter alia, the Unified State Register of Rights to Immovable Property and Transactions Therewith) in the absence of a writ of execution issued by a state court in respect of such an award. 178 New Law on Arbitration, art. 42.  Therefore, although a dispute in respect of real estate may be referred to Russian domestic arbitration, any subsequent changes or additions to the state registers may only be performed after a decision of an arbitral institution is recognised and enforced by a competent Russian court. 

Sergey Yuryev