On 26 May 2011, the Constitutional Court of the Russian Federation (the "Constitutional Court") ruled that provisions permitting arbitration tribunals to hear civil cases in respect of immovable property, including mortgage-related cases, do not contradict the Constitution of the Russian Federation.

Specifically, the Constitutional Court has confirmed that parties may stipulate in their agreements that any disputes in respect of immovable property will be settled by arbitration. This includes those cases relating to mortgage agreements and levy execution against pledged property.

Even though an arbitration hearing tends to be a more expensive means to resolve a dispute, it does have a number of advantages over state courts. In particular, there is the possibility to choose:

  • an arbitration tribunal that is determined to be a mutually convenient location to hear a dispute for all the parties; and
  • the language used for the hearing.

Consequently, the Constitutional Court has effectively put an end to the dispute of whether arbitration tribunals have jurisdiction to hear cases relating to immovable property. However, that the Constitutional Court expressly declined to rule on whether this principle would extend to arbitration tribunals that are created under the laws of a foreign jurisdiction (under Russian law referred to as "international commercial arbitration courts").

[Decree No. 10-P of the Constitutional Court of the Russian Federation, dated 26 May 2011]