Russian commercial courts seem to have more cases than they can handle and the legislature has made various attempts to reduce caseloads. Recent amendments to the Arbitrazh Procedural Code introduced a mandatory pre-litigation procedure in the hope that many cases will be resolved before the disputes escalate. These changes may be relevant for users of international arbitration, as they may affect the enforcement procedure for commercial arbitral awards in Russia.
The relevant amendments came into force on June 1 2016 and apply to cases commenced from that date. Essentially, the amendments implement mandatory pre-trial settlement attempts for most commercial disputes. In general, a prospective claimant must serve a claim letter on the opposing party and wait 30 days from the date on which the claim letter was sent to file a claim. A 'postbox' rule applies to the calculation of this period, which starts from the date on which the claim was dispatched. Claimants need not demonstrate actual attempts to negotiate a settlement and the claim letter will essentially serve as an advance warning of future litigation and an invitation for the prospective respondent to settle the claims out of court.
Other pre-trial procedures may be prescribed by the law or agreed on by the parties, but it is unclear whether the parties can agree to reduce the 30-day period allowed for negotiations under procedural law.
While there are no requirements for the claim letter's content, usual practice would be for the claimant to outline the claim and its factual and legal background and indicate its willingness to go to court should the case not be resolved amicably.
If the claimant seeks to commence the case without having complied with the pre-trial procedures, the statement of claim will be returned and the case will be discontinued without prejudice. The claimant could therefore file a new claim after having followed the pre-trial procedures. However, there may be a risk that the limitation period will have expired.
Although it is the general consensus that mandatory pre-trial procedures can reduce commercial court caseloads, it came as a surprise for arbitration practitioners that these procedures may also apply to the enforcement of arbitral awards.
When it comes to enforcement, the parties will already have arbitrated their disputes on the merits. Hence, there may be no real reason to seek to reduce the caseload associated with the enforcement of the resulting awards. There will also be no unresolved dispute on the merits to be settled amicably at this stage. In addition, procedural legislation prescribes the list of necessary exhibits to be filed with the statement of claim to commence litigation, and the amended rules include the requirement to submit proof of compliance with the pre-trial procedures. However, the rules for applications for the enforcement of arbitral awards are unchanged in this regard, and the submission of proof of compliance with the pre-trial procedures is not required. In light of these reasons, some experts have questioned whether the new pre-trial requirements apply to the enforcement of arbitral awards.
However, there is a serious risk that they do. The new rules list the categories of dispute for which parties need not comply with the pre-trial procedures, including bankruptcy cases and corporate disputes. The list also includes cases for the setting aside of arbitral awards, but not the enforcement of arbitral awards. This may serve a compelling indication of the legislature's will to exempt only set-aside proceedings and make the enforcement of arbitral awards subject to pre-trial settlement attempts.
These two types of case have at least two distinctions which may justify their different treatment. First, the limitation period for filing a set-aside application is only three months, whereas an application for the enforcement of an arbitral award can be filed within three years after it was issued. Most importantly, while an out-of-court settlement on setting aside an award is impossible as a matter of law and practice, it is not uncommon for parties to enter into post-award settlement arrangements at the enforcement stage. The 2008 Queen Mary University Arbitration survey indicated that at least 40% of participants were involved in post-award settlement negotiations.(1)
The new rules form part of procedural legislation and will not affect arbitration proceedings as such. Hence, pre-arbitral procedures will need to be complied with only if the relevant arbitration agreement provides for them.
It is unclear whether the new rules apply to the enforcement of arbitral awards; court practice will hopefully resolve this uncertainty. However, there are strong indications in favour of a conservative interpretation and parties may want to play it safe and send a claim letter to the opposing party requiring a voluntary payment before filing the relevant application with the court.
These changes may be seen as an unnecessary regression in light of the arbitration reform that will reduce the time that the first-instance court will have to resolve an enforcement application from three months to one month. However, in practice, the winning party will almost always request the losing party to comply with the award voluntarily before venturing into the enforcement battle. To comply with the new pre-trial procedures, claimants must ensure that there is a paper trail showing that the demand for voluntary compliance with the award has been served on the respondent, and that the prescribed 30 days have passed before they file the application.
For further information on this topic please contact Andrey Panov at Norton Rose Fulbright (Central Europe) LLP by telephone (+7 499 924 5101) or email (firstname.lastname@example.org). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.
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