At the beginning of September 2012, the Presidium of the Supreme Commercial Court of the Russian Federation (the “SCC”) published a ruling on the validity of optional arbitration clauses in agreements (the “Ruling”). Optional arbitration clauses have become very popular in the business environment and, in particular, in corporate finance.

The SCC struck down the entire optional arbitration clause rather than just the offending paragraphs, which reserved the right of one party to choose between referring disputes to arbitration or to the state courts. Thus, this Ruling significantly undermines the widely used practice of including such clauses in international agreements.

As a result, parties should be considering whether to amend existing agreements containing such clauses in order to give equal rights to both parties to submit disputes to arbitration or the state courts. This is essentially the only means of eliminating the risks raised by the SCC’s Ruling.

For more details on this case, please see our Alert.

[Ruling No. 1831/12 of the Presidium of the Supreme Commercial Court of the Russian Federation, dated

19 June 2012]