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National arbitration laws
What legislation applies to arbitration in your jurisdiction?
International arbitrations are governed by the Law on International Commercial Arbitration of July 7 1993 (the International Arbitration Law). The law is based on the UNCITRAL Model Law 1985. Amendments to the law are expected to enter into force on September 1 2016 which will reflect, among other things, some of the 2006 amendments to the UNCITRAL Model Law.
A notable difference between the International Arbitration Law and the UNCITRAL Model Law concerns the scope of application. The International Arbitration Law (as amended) applies only to international disputes, including:
- disputes where at least one party has its place of business outside Russia;
- disputes where a substantial part of the commercial relationship is to be performed outside Russia;
- disputes where the subject matter of the dispute is most closely connected to a place outside Russia; and
- disputes related to foreign investment in Russia or Russian investment abroad.
Like the UNCITRAL Model Law, the International Arbitration Law primarily contains rules which govern international arbitrations seated in Russia, with a few provisions applicable to those with a non-Russian seat.
Domestic arbitrations will be governed by the Federal Law on Arbitration (Arbitral Proceedings) (the Domestic Arbitration Law), which is scheduled to enter into force on September 1 2016. The Domestic Arbitration Law will replace a 2002 law addressing the same issues. The Domestic Arbitration Law will govern some matters relevant for international arbitrations seated in Russia, including:
- records of arbitration;
- the effect of arbitral awards on public registries;
- the establishment and function of arbitral institutions, including requirements for institutional arbitration rules;
- requirements for arbitrators; and
- liability of arbitrators and arbitral institutions.
The Code of Civil Procedure and the Code of Arbitrazh (Commercial) Procedure, both dated 2002 (as amended), set out rules for domestic courts when dealing with arbitration issues. Both codes have been updated (with amendments coming into force on September 1 2016) to bring them in line with the new arbitration laws.
These responses focus primarily on international arbitrations and the respective regulations that will come into force starting September 1 2016.
Two leading arbitral institutions in Russia usually deal with international disputes:
- the International Commercial Arbitration Court; and
- the Maritime Arbitration Commission.
Both institutions function under the auspices of the Chamber of Commerce and Industry.
The rules of these institutions often complement the national laws.
In accordance with the amended legal regime, Russian arbitral institutions (with the exception of the two above) must be licensed by the government, provided that they meet certain criteria. Foreign arbitral institutions must also be licensed if they want to administer:
- arbitrations seated in Russia; or
- potentially, arbitrations seated outside of Russia if they involve corporate disputes of Russian companies.
With respect to this second category, Article 225.1 of the Code of Arbitrazh (Commercial) Procedure provides a detailed, yet not exhaustive, list of such disputes. Only a limited category of corporate disputes (eg, disputes over the sale or control of shares in a Russian company) can be arbitrated abroad.
Foreign arbitral institutions – such as the International Chamber of Commerce or London Court of International Arbitration – can be licensed based solely on their reputation, which must be “widely recognized internationally”. The expectation is that prominent international arbitration institutions will apply for and obtain licenses.
Are there any mandatory laws?
All laws and procedural codes mentioned above are binding, but many of their provisions allow for derogations. Certain derogations (eg, exclusion of recourse to courts) can be made only by an express agreement of the parties, rather than by reference to arbitration rules.
New York Convention
Is your country a signatory to the New York Convention? If so, what is the date of entry into force?
The Soviet Union acceded to the New York Convention in 1960, and the convention entered into force later that year. As successor to the Soviet Union, Russia continues to recognise the convention.
Are there any reservations to the general obligations of the convention?
When acceding to the convention, the Soviet Union made a declaration that it would apply the convention with respect to arbitral awards issued in states that were not parties to the convention based on the principle of reciprocity.
Treaties and conventions
What other treaties and conventions in relation to arbitration is your jurisdiction party to?
Russia is a party to the European Convention on International Commercial Arbitration of 1961.
Russia is also a party to the Convention on Resolution by Arbitration of Civil-Law Disputes Deriving from Economic and Research and Technology Relations of 1972.
As of February 1 2016, Russia has signed 74 bilateral investment treaties, 58 of which have entered into force.
Russia signed, but never ratified, the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States. The multilateral Treaty on Eurasian Economic Union that affords private arbitration rights to nationals of certain Commonwealth of Independent States members entered into force on January 1 2015.
Has your jurisdiction adopted the UNCITRAL Model Law?
The International Arbitration Law is based on the original version of the UNCITRAL Model Law 1985 and reflects some of the 2006 amendments thereto.
Are there any impending plans to reform the arbitration laws in your jurisdiction?
On December 29 2015 statutes were promulgated by the president:
- amending the International Arbitration Law, the procedural codes and other laws, and
- replacing the existing regulations with the new Domestic Arbitration Law (based largely on the UNCITRAL Model Law).
Both statutes enter into force on September 1 2016, although some of their provisions become operative at later dates.
What are the validity requirements for an arbitration agreement?
Arbitration agreements must be in writing. Article 7 of the International Arbitration Law (as amended) has broadened the written form requirement to include not only a document signed by all parties, or an exchange of letters but also, among other things, electronic communications and exchange of statements of claim and defence.
An arbitration agreement is void if it was entered into by a party which lacked the capacity to do so. Under Article V(1)(a) of the New York Convention, the capacity of the parties to enter into an arbitration agreement shall be assessed based on the law applicable to them. The capacity of a Russian party to enter into an arbitration agreement will be assessed under Russian law. When dealing with a Russian party, it is advisable to thoroughly check the capacity of its representatives to enter into the arbitration agreement (eg, whether respective power of attorney has been validly issued and whether the respective actions have been approved by necessary management bodies).
Under Russian law, an arbitration agreement may be held void if it:
- was obtained through fraud or duress;
- was concluded because of hardship or mistake; or
- is contrary to the law or public morals.
An arbitration agreement may also be held incapable of being performed - which relates primarily to the clarity of the arbitration agreement (eg, whether the arbitral institution has been unambiguously defined). Historically, relatively minor mistakes in the arbitration agreement have been sufficient for Russian courts to conclude that the agreement was incapable of being performed. Over the last decade, the Russian courts have taken a more balanced approach to this issue, but occasionally demonstrate the older formalistic approach. Article 7(9) of the International Arbitration Law expressly requires that any doubts in interpretation of an arbitration agreement be resolved in favour of its validity and capability of being performed.
Enforcement of agreements
How are arbitration agreements enforced in your jurisdiction? What is the attitude of the national courts towards arbitration agreements?
Under Article 8 of the International Arbitration Law, the Russian court seized of a matter that is subject to an arbitration agreement shall, at the request of a party, refer the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.
Accordingly, to enforce an arbitration agreement, the Russian courts will verify that:
- the dispute falls within the scope of the arbitration agreement;
- the arbitration agreement has been made in a proper form, the subject matter is arbitrable and the agreement is not null and void, inoperative or incapable of being performed, and
- one of the parties has requested enforcement of the arbitration agreement by no later than submission of its first statement on the substance of the dispute.
Article 7(12) now stipulates that, by default, an arbitration agreement contained in a contract also covers disputes relating to termination and invalidity of that contract.
Can an arbitral tribunal with its seat in your jurisdiction consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances?
This issue is not addressed by national laws, international treaties or the International Commercial Arbitration Court Rules.
In such circumstances, it may reasonably be expected that Russian tribunals and courts will likely consider the issue cautiously and conservatively, focusing on whether the affected parties have manifested their consent to consolidation.
Choice of law
How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?
Under Article 28 of the International Arbitration Law, the tribunal will follow the rules of law chosen by the parties. Failing any designation by the parties, the tribunal shall apply the law determined by the conflict of laws rules which it considers applicable. In practice, the International Commercial Arbitration Court usually refers to Russian conflict of laws rules. The International Arbitration Law contains no provision permitting an arbitral tribunal to decide ex aequo et bono or asamiable compositeur.
Are there any provisions on the separability of arbitration agreements?
Article 16(1) of the International Arbitration Law provides that an arbitration clause should be treated as independent of other terms of the contract and invalidity of the contract shall not in itself entail the invalidity of an arbitration clause. The Russian courts usually give due regard to the separability principle. However, some deviations have occurred.
Are multiparty agreements recognised?
Neither national laws nor international treaties address this issue as a general matter. Articles 7(7) and 7(8) of the amended International Arbitration Law specifically allow arbitration agreements to be incorporated in organised trading rules or clearing facilities rules or charters of private companies with fewer than 1,000 shareholders. The International Commercial Arbitration Court Rules allow for joinder by consent and contain provisions for choosing arbitrators in multiparty proceedings.
Criteria for arbitrators
Are there any restrictions?
The parties are free to specify any criteria or qualifications on the arbitrators and to designate particular individuals as arbitrators, subject to restrictions imposed by law.
Under Article 11 of the Domestic Arbitration Law (which applies to international arbitrations seated in Russia), an arbitrator must be at least 25 years old and possess full legal capacity. Individuals with outstanding criminal records or those who have been dishonourably discharged from law enforcement, the judiciary or the bar are prohibited from serving as arbitrators. Sitting Russian judges and public officials are prohibited from serving as arbitrators. Retired judges may be appointed as arbitrators.
If a tribunal consists of more than one arbitrator, at least one of the arbitrators (by default, the president of the tribunal) must have a Russian or a recognised foreign law degree.
What can be stipulated about the tribunal in the agreement?
The parties are free to specify any criteria on:
- the arbitrators;
- the number of arbitrators and their powers;
- the composition of the tribunal; and
- the procedure and grounds for challenging and replacing the arbitrators.
The International Arbitration Law and the procedural codes set out procedures for obtaining court assistance with respect to the composition of the tribunal. Parties may choose an additional authority to appoint arbitrators. However, only parties to an arbitration administered by an arbitral institution may exclude courts as an authority of last resort.
Are there any default legal requirements as to the selection of a tribunal - for example, concerning the number of arbitrators or their characteristics?
The International Arbitration Law requires that the number of arbitrators be odd, unless the law allows an even number (eg, the Maritime Arbitration Commission is exempted from the odd number requirement). The default number of arbitrators is three. The default procedure for appointing the arbitrators is that each party shall appoint one arbitrator and the two arbitrators thus appointed will then appoint the third arbitrator. The default procedure for appointing a sole arbitrator is that the parties should jointly appoint a candidate.
Should any or both parties, the appointed arbitrators or an arbitral institution fail to act with respect to the appointment of arbitrators, the International Arbitration Law provides procedures for assistance from the chosen appointing authority or from a court.
Challenging the appointment of an arbitrator
Can the appointment of an arbitrator be challenged? Can an arbitrator be disqualified? What is the procedure for this?
Under Article 12(2) of the International Arbitration Law, an arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence, or if he or she does not possess the qualifications required by law or by the parties’ agreement.
The practice of Russian courts with respect to the assessment of an arbitrator’s impartiality or independence is generally balanced. However, courts have found that indirect relations between a party and an arbitrator constituted grounds to doubt the arbitrator’s impartiality. When assessing impartiality and independence, appointing authorities and courts may follow ‘soft law’ instruments such as the International Guidelines on Conflict of Interest in International Arbitration of 2004 or the International Commercial Arbitration Court Rules on the Impartiality and Independence of Arbitrators of 2010.
A default procedure for challenging arbitrators is provided in Article 13 of the International Arbitration Law. The application for challenge must be submitted within 15 days of constitution of the tribunal or of the party becoming aware of the grounds for challenge, and will be decided by the tribunal. The tribunal’s decision may be appealed to a court. The parties are free to agree on a different procedure for challenging an arbitrator. However, only parties to an arbitration administered by an arbitral institution may exclude courts as an authority of last resort.
How should an objection to jurisdiction be raised?
Article 16(2) of the International Arbitration Law provides that an objection to jurisdiction must be raised by no later than submission of the statement of defence.
Replacement of an arbitrator
Why and how can an arbitrator be replaced?
Under Articles 13 to 15 of the International Arbitration Law, an arbitrator can be replaced in the following circumstances:
Where the arbitrator is unable (de jure or de facto) to participate in the proceedings or fails to do so during an unjustifiably long period, he or she may be replaced if:
- he or she voluntarily withdraws from office; or
- the parties agree to terminate his or her mandate; or
- the arbitrator’s mandate is terminated by a competent court at the request of either party (in case the arbitration is administered by an arbitral institution, the parties may expressly agree on another procedure without recourse to courts).
The arbitrator’s appointment is successfully challenged.
According to Article 15 of the International Arbitration Law, a substitute arbitrator shall be appointed according to the rules applicable to the appointment of the arbitrator being replaced.
Powers and obligations
What powers and obligations do arbitrators have?
Some key powers as stipulated or implied in the International Arbitration Law include the following:
- The tribunal is competent to rule on a challenge to its jurisdiction.
- In the absence of a choice of law by the parties, the tribunal shall apply the law which it determines is most appropriate in accordance with the conflict of laws rules which it considers applicable.
- Apart from the mandatory provisions of the International Arbitration Law, applicable arbitration rules and the agreement of the parties, the tribunal is free to determine any procedural and evidentiary issues.
- The tribunal may order interim measures.
The arbitrators’ key obligations primarily derive from their implied duty to take all necessary means to issue an enforceable award. This requires that they:
- afford each party an equal and fair opportunity to present its case;
- notify the parties of any facts which may cast doubt on their impartiality and independence;
- where appropriate, give due regard to the mandatory laws and policy of the concerned states; and
- ensure that they are competent to decide the dispute and that their decision will not affect the rights of third parties.
Liability of arbitrators
Are arbitrators immune from liability?
According to Article 51 of the Domestic Arbitration Law, arbitrators (acting both in domestic or international arbitrations seated in Russia) can be subject to criminal liability (eg, for fraud). They are immune from liability for damages other than on the basis of a final criminal verdict.
Communicating with the tribunal
How do the parties communicate with the tribunal?
Article 3(1)(a) of the International Arbitration Law provides that, unless otherwise agreed by the parties, written communications, including communications with the tribunal, shall be delivered either personally or by mail.
Under the International Commercial Arbitration Court (ICAC) Rules, key procedural documents shall be sent by registered mail, while other documents may be sent by other means, including fax or email. In practice, the primary means of communicating with an ICAC tribunal or secretariat is by mail or personal delivery, rather than email. The same is generally true for other arbitral institutions in Russia.
Is unanimous agreement of the tribunal required? If there is disagreement, does the will of the majority suffice? What are the implications of this?
Unanimous decisions are not required, unless the parties have agreed otherwise.
Are there any disputes incapable of being referred to arbitration?
Before the arbitration reform, a large number of arbitrability issues were uncertain and developed mostly through case law which was not always clear.
The new legislation provides for an exhaustive list of non-arbitrable matters, including (but not limited to):
- all public law disputes (eg, tax and customs);
- bankruptcy disputes;
- disputes involving organisations exercising collective management of copyright and related rights;
- applications to "determine facts of legal importance" (as defined by the procedural codes – that is, confirmation of the applicant possessing property for a certain period of time);
- class action disputes;
- certain corporate disputes, such as those relating to convening of general shareholders' meetings, expulsion of shareholders and buy-back and mandatory bids;
- most corporate disputes relating to companies strategically significant for national security (as defined in the 2008 Federal Law on Strategic Companies);
- privatisation disputes;
- public procurement disputes;
- environmental tort disputes;
- applications to declare a res nullius;
- applications to declare lost securities void or restore rights pertaining to lost securities;
- personal injury disputes; and
- labour disputes.
Some disputes, such as corporate disputes (as defined in Article 225.1 of the Code of Arbitrazh (Commercial) Procedure), may be arbitrable subject only to additional requirements (eg, regarding the type of arbitration (only institutional), rules or, sometimes, seat (only in Russia)).
The breadth of actions that are not arbitrable under the new regime could give rise to new grounds to challenge enforcement of arbitration awards in the Russia. Judicial and scholarly commentary on these provisions will provide important guidance on their application in the coming years.
Can the arbitrability of a dispute be challenged?
Arbitrability can be challenged before arbitrators or in court. Arbitrators are entitled to rule on arbitrability of a dispute as a part of their competence to rule on their jurisdiction. In line with Article V(2)(a) of the New York Convention, a court maysua sponte set aside or refuse to enforce an arbitral award rendered on a non-arbitrable matter. Further, courts may scrutinise arbitrability whenever the arbitration clause is brought to their attention (eg, when a party objects to a court’s jurisdiction based on an arbitration agreement or requests interim measures).
Jurisdiction and competence-competence
Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence?
The competence-competence principle is recognised in Article 16 of the International Arbitration Law. The tribunal may rule on a plea of lack of jurisdiction and a ruling that a tribunal has competence may then be challenged in a state court. Although the court reviews the jurisdictional issue de novo, a court challenge does not automatically result in a stay of arbitration.
There are several ways for a party to an arbitration to request state courts to determine the tribunal’s jurisdiction:
- challenge the preliminary positive ruling on jurisdiction (parties to an institutional arbitration may waive this right by express agreement);
- request a declaratory ruling from a court regarding the validity of an arbitration agreement, irrespective of whether arbitration proceedings have already commenced. However, it is not clear whether state courts are empowered to rule on the tribunal’s competence before the tribunal rules on this issue itself;
- file a substantive claim in court, in which case the court will have to determine the validity of the arbitration agreement as a preliminary matter;
- raise an objection before a court requested to grant interim measures; or
- challenge a tribunal’s decision on its jurisdiction in the course of proceedings to set aside or enforce the arbitral award.
Starting an arbitration proceeding
What is needed to commence arbitration?
Under Article 21 of the International Arbitration Law, arbitration proceedings commence on the date on which the statement of claim is served on the respondent. Parties may agree on additional requirements. For example, they may agree that prior negotiations are required or that a certain ‘cooling-off period’ must expire before the claimant can file its request for arbitration.
Are there any limitation periods for the commencement of arbitration?
Limitation periods are generally considered to be part of substantive law. If substantive Russian law governs the subject matter of the dispute, the general statute of limitations is three years from the moment that the claimant learned (or reasonably should have learned) of the grounds for its claim and the identity of the responsible party. Shorter or longer limitation periods may apply, depending on the claim in question.
Are there any procedural rules that arbitrators must follow?
Parties are free to agree on the procedural rules that will govern the arbitration proceedings. Failing such agreement, the tribunal may, subject to the default provisions of the law, decide procedural and evidentiary issues as it wishes.
Are dissenting opinions permitted under the law of your jurisdiction?
Articles 29 and 31(1) of the International Arbitration Law imply that dissenting arbitrators may refuse to sign the award issued by majority. The reasons for withholding their signature should be specified.
Can local courts intervene in proceedings?
Under the International Arbitration Law, courts are prohibited from intervening in arbitration proceedings, except in limited circumstances, such as:
- to assist with interim measures;
- to assist with the collection of evidence;
- to assist with the composition of the tribunal, which includes ruling on challenges to arbitrators; and
- to hear appeals from an arbitral determination on jurisdiction (but such appeals need not ordinarily result in a stay of the arbitration).
Can the local courts assist in choosing arbitrators?
By default, the courts will function as the appointing authority if the parties fail to appoint arbitrators. The parties may specify another appointing authority, but ultimate recourse to the courts can be ruled out only by express agreement of the parties to arbitration administered by an arbitral institution.
What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration? Can the courts compel parties to arbitrate? Can they issue subpoenas to third parties?
Under Article 25 of the International Arbitration Law, if a respondent fails to submit its statement of defence, to appear at a hearing or to produce documentary evidence, the tribunal may continue the proceedings and issue an award. The tribunal and the courts lack the power to compel a respondent to participate in arbitration proceedings.
Tribunals may invite third parties to participate in the proceedings, but cannot compel participation. Under the amended laws, the courts can theoretically collect evidence from third parties.
In what instances can third parties be bound by an arbitration agreement or award?
In general, there are no express provisions or universally recognised doctrines that would allow for an arbitration agreement or arbitral award to bind third parties.
In many cases shareholders of a company that is or may become involved in arbitration proceedings file derivative claims in Russian state courts to have an arbitration agreement or the contract underlying the dispute invalidated, and thus impede the arbitration proceedings or enforcement of an arbitral award in Russia. Shareholders usually claim that they are not bound by the arbitration agreement because they are not signatories to it.
Third parties are entitled to set aside or resist enforcement of an award which affects their rights.
Default language and seat
Unless agreed by the parties, what is the default language and location for arbitrations?
Unless otherwise agreed by the parties, the tribunal is entitled to determine the place and language of the proceedings.
How is evidence obtained by the tribunal?
Under the International Arbitration Law, tribunals have no express authority to order the production of evidence. However, since tribunals are generally entitled to shape proceedings, they may order the production of evidence by the parties to the arbitration agreement. The consequences of a failure to produce evidence are not specified; it is for the arbitrators to draw appropriate inferences in this regard. Tribunals may invite – but cannot compel – third parties to produce evidence or witnesses to provide testimony.
Tribunals and parties may follow the International Bar Association Rules on the Taking of Evidence in International Arbitration as a ‘soft law’ instrument.
If an arbitration is administered by an arbitral institution, tribunals or the parties authorised by them can seek assistance of courts regarding collection of documentary or physical evidence.
What kinds of evidence are acceptable?
Unless otherwise specified by the parties or provided in the rules of an arbitral institution, there are no restrictions with respect to acceptable evidence. Documentary evidence, factual witnesses, party-appointed and tribunal-appointed experts and material evidence may all be utilised.
Is confidentiality ensured?
The International Arbitration Law does not address the issue of confidentiality. The parties are free to agree on confidentiality protection.
The rules of arbitral institutions may address confidentiality. For example, Paragraph 25 of the International Commercial Arbitration Court (ICAC) Rules provides that arbitrators and ICAC staff shall preserve confidentiality. However, this provision does not impose confidentiality obligations on the parties to the proceedings. The long-standing practice of the ICAC is to publish redacted versions of its decisions.
Some corporate disputes can be arbitrated only pursuant to rules mandating public notification of the arbitration on the arbitral institution's website within three days of the arbitral institution receiving the statement of claim.
Can information in arbitral proceedings be disclosed in subsequent proceedings?
Information and documents from the arbitration proceedings may be filed in court (eg, in proceedings to have the award set aside or enforced or to obtain interim measures). Court proceedings and judgments are generally public, although some submissions made in court proceedings are unavailable to the public. Third parties may be granted access to court records by the judge on showing of good cause. Under certain circumstances, parties to the litigation may request that the court declare the proceedings non-public.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?
There are no general ethical codes for legal professionals in Russia.
Ethical rules exist for advocates – a special category of legal professionals which has historically focused on representing clients in courts.
Judges are subject to certain ethical rules. However, these rules do not apply to arbitrators, unless they are retired judges.
Estimation & allocation
How are the costs of arbitration proceedings estimated and allocated?
The International Arbitration Law does not address the costs of arbitration. Relevant regulations are usually contained in institutional arbitration rules.
As an example, International Commercial Arbitration Court (ICAC) fees are governed by the Schedule on Arbitration Fees and Costs which is attached to the ICAC Rules. Arbitration fees are comprised of the arbitrators’ fees and administration fees, which are both determined on an ad valorem basis. The administration fees are considerably higher than the arbitrators’ fees; this is a distinctive feature of the ICAC arbitration. The comparatively modest nature of the arbitrators’ fees means that many top-ranked international arbitrators decline nominations for ICAC arbitrations.
Unless the parties have agreed otherwise, the arbitration fees shall be charged to the party against which the award is made either in full or pro rata (in case of a partial award).
The parties may be requested to cover costs of the tribunal in addition to the arbitration fees, such as the costs of engaging experts and translators, travel costs and so on.
Paragraph 9 of the Schedule to the ICAC Rules provides that a successful party may request compensation of its reasonable expenses. ICAC tribunals are usually conservative in assessing parties’ reasonable legal costs. Tribunals are also empowered to order an alternative allocation of the parties’ legal costs based on the circumstances.
Security for costs
Can the national court or tribunal order security for costs under the law in your jurisdiction?
Under Paragraph 14 of the International Commercial Arbitration Court (ICAC) Rules, the claimant is obliged to make an advance payment of arbitration fees as ordered by the ICAC. The case cannot progress until the advance payment is made. It is another distinguishing feature of ICAC arbitration that the advance payment is made solely by the claimant.
Should the need to enforce security for costs arise, it is unlikely that the Russian state courts will comply under the existing regulatory framework, since the courts are prepared to enforce only final arbitral awards.
What legal requirements are there for recognition of an award? Must reasons be given for the award? Does the award need to be reviewed by any other body?
Under Article 31 of the International Arbitration Law, an award must be made in writing, signed at least by a majority of the tribunal, and state the date and place and the reasons for the award.
Institutional rules may provide further details as to the form and content of an award.
Under the International Arbitration Law, an award need not be reviewed by any body other than the tribunal. The award should be translated into Russian before submission for recognition or enforcement by a Russian court.
Timeframe for delivery
Are there any time limits on delivery of the award?
The International Arbitration Law sets no timeframe for delivery of the award. Certain institutional rules may address this issue. For example, under the International Commercial Arbitration Court (ICAC) Rules, the tribunal must complete the arbitration proceedings within 180 days of the date of its composition. The ICAC Presidium may, and routinely does, extend this deadline.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the court?
There are no express limits on the remedies available. However, various practical considerations require a cautious approach towards the use of certain remedies. For example, parties are normally cautious about requesting specific performance because of the difficulty of enforcement. Tribunals are also cautious about excessive damages that may be characterised as punitive, since such awards may be held to be against Russian public policy.
What interim measures are available? Will local courts issue interim measures pending constitution of the tribunal?
Russian courts are entitled to grant interim measures in aid of any arbitration proceeding, whether in or outside Russia, including those that have not yet commenced or where the tribunal has not yet been constituted. Parties can request any measure that they believe will achieve their legitimate aims. Notably, however, Russian courts are conservative in granting interim measures.
Russian courts will not enforce a tribunal’s interim orders tribunals. The parties must thus submit all relevant documents to the court for an independent decision on the need for interim measures. Such proceedings are generally public.
Can interest be awarded?
Russian procedural law does not vest arbitrators with the authority to award interest. Such entitlement may derive from an agreement (applicable arbitral rules) or from applicable substantive law.
At what rate?
If Russian substantive law applies, then interest may be awarded at a rate equal to the average interest rate for short-term deposits in the respective currency of the creditor’s place of residence. Commercial parties may agree on compound interest.
Is the award final and binding?
An award which terminates the arbitration proceedings is assumed to be final. The tribunal may designate its other rulings as final, but the Russian courts may reject this designation and refuse enforcement of interim awards.
The International Arbitration Law does not provide specific procedures for the award to become binding; mere issue of the award by the tribunal is sufficient. However, the law does not restrict the parties from specifying extra conditions for the award to enter into force.
What if there are any mistakes?
The award may be corrected or interpreted on the request of a party or at the tribunal’s own initiative. The procedure for doing so is set out in Article 33 of the International Arbitration Law.
Can the parties exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?
Article 34(1) of the International Arbitration Law (as amended) empowers the parties to an arbitration administered by an arbitral institution to waive (by express agreement) the right to challenge the award in court. An arbitration agreement establishing that the award is final will be treated as an express waiver.
What is the procedure for challenging awards?
Article 34 of the International Arbitration Law provides that recourse to a court against an arbitral award is possible only through an application to set aside the award; no appeal or other means of recourse is allowed.
An application to set aside an award may be made to a court of first instance by a party to the proceedings or by an interested third party within three months of the date on which the applicant received (or learned of) the award. The judgment of the court of first instance may then be appealed. A court may suspend proceedings to set aside an award for no longer than three months and allow the tribunal to resume the arbitration proceedings and eliminate the grounds for setting aside of the award.
On what grounds can parties appeal an award?
The grounds to set aside an award, as stipulated in Article 34(2) of the International Arbitration Law, reflect the grounds stipulated in Article V of the New York Convention (except for Article V(1)(e)).
What steps can be taken to enforce the award if there is a failure to comply?
An application for enforcement of an award may be filed with a Russian state court. Russian state courts will generally enforce an international award if:
- it was issued either in Russia or in any other state that is party to the New York Convention; and
- it meets the requirements for enforcement under the New York Convention.
The application must be filed within the statutory deadline (three years after the award was issued).
Russian state courts may also enforce an international award issued in a state which is not party to the New York Convention, provided that the state in which the award was issued would provide reciprocal treatment to awards made in Russia.
If an arbitration award is enforced by a Russian state court, compliance with the award may be then compelled through Russian bailiffs.
Declaratory awards that do not require enforcement are recognised automatically, unless an interested party petitions a court to refuse recognition within a month of the party becoming aware of the award. The grounds for refusing recognition are the same as those stipulated in Article V of the New York Convention in this regard.
Can awards be enforced in local courts?
Yes – both domestic and international arbitral awards may be enforced in Russian state courts.
How enforceable is the award internationally?
Russian international arbitral awards are enforceable in other New York Convention member states and some countries that are not members to the Convention but have executed other international treaties with Russia affording recognition to the arbitral awards (e.g., Iraq, Yemen).
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
Sovereign jurisdictional immunity may be waived by an express and unambiguous stipulation; an arbitration agreement signed by a state entity may qualify as such a stipulation. Immunity against execution may also be waived; however, a separate, express and unambiguous stipulation is required for this.
Article 6(2) of the recently adopted 2015 Federal Law on Jurisdictional Immunities of a Foreign State and Property of a Foreign State provides that by concluding an arbitration agreement, a foreign state waives its jurisdictional immunity in relation to this dispute. Article 6(6) clarifies that such a waiver does not constitute a waiver of immunity from interim measures or execution. Article 15(3) denies immunity from execution to state property used for non-sovereign purposes.
Are there any other bases on which an award may be challenged, and if so, by what?
The enforcement of awards may be refused based only on an exhaustive list of grounds which are stipulated in Article V of the New York Convention. Historically, Russian courts tended to apply the public policy exception broadly. However, after the Supreme Arbitrazh (Commercial) Court issued guidelines to restrict the application of the public policy exception in 2013, the number of cases in which the public policy exception is applied has declined.
How enforceable are foreign arbitral awards in your jurisdiction?
By operation of the New York Convention and Article 36 of the International Arbitration Law, international arbitral awards – whether issued in Russia or in any other New York Convention member state – may be enforced in Russia by the Russian courts. Russia is a party to a number of other international treaties that provide for the mutual recognition of arbitral awards with countries that are not members to the New York Convention (eg, Iraq and Yemen).
Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?
Under Article V(1)(e) of the New York Convention, Russian courts may refuse to enforce an award that has been set aside in the country of origin. Article IX of the European Convention of 1961 further provides that Article V(1)(e) of the New York Convention may be invoked only if the award has been set aside in the country of origin based on grounds which are stipulated in Articles V(1)(a) to (d) of the New York Convention.
Rules and restrictions
Are there rules or restrictions on third-party funders?
Class-action or group arbitration
Is there a concept in your jurisdiction providing for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated?
Article 33(2)(3) of the Code of Arbitrazh (Commercial) Procedure prohibits arbitration of class-action disputes.
Are there any hot topics or trends emerging in arbitration in your jurisdiction?
Arbitration reform – the key provisions of which are set to become operative on September 1 2016 – is expected to bring major changes to the way arbitrations function in Russia. Some of the newly adopted legislative provisions suffer from ambiguity and require testing by application. In particular, it remains to be seen how the government will treat foreign arbitral institutions applying for a license.
Shareholders starting parallel court proceedings (often called ‘Russian torpedoes’) on a related subject matter when a company is bound by an arbitration clause still presents a serious challenge for legal certainty and enforceability of arbitral awards. It is being debated whether anti-suit injunctions could be a solution.
Recent Russian jurisprudence has established that where an individual (eg, an ultimate beneficial owner of a company) issues a guarantee to secure the company’s obligations, arbitration with respect to such a guarantee falls under the supervisory authority of Russian courts of general jurisdiction, rather than arbitrazh (commercial) courts. The inexperience of courts of general jurisdiction in arbitration-related matters may be considered a risk factor for the parties involved.