On 26 December 2018, the Russian Supreme Court issued a review of Russian court practice relating to international and domestic arbitration, and the enforcement and recognition of awards (Review).
Reviews issued by the Russian Supreme Court are designed to serve as the guidelines for the state courts on potentially controversial areas of court practice. They also usually set out the legal test or reasoning to be adopted by the lower courts and legal practitioners on specific legal issues.
The Review covers a number of interesting points on arbitration and it is notable that the Supreme Court deals with all of them from the standpoint of party autonomy i.e. the basic right of commercial parties to agree on arbitration (or indeed other dispute resolution mechanisms) alternative to state courts. In doing so, the Supreme Court has confirmed its pro-arbitration approach.
In summary, the Review addresses the following key issues:
- Model arbitration clauses recommended by arbitration institutions are enforceable by default. The Supreme Court refers to a case where an ICC model arbitration clause was included in the international commercial contract. The Supreme Court analyses the model clause and notes that it is recommended by the ICC for disputes to be referred to international arbitration administered under the ICC Rules of Arbitration. According to the Supreme Court, a reference to the ICC Rules of Arbitration manifestly demonstrates that there are no doubts that the parties agreed to international arbitration under ICC Rules of Arbitration, and the clause should be enforced by the Russian state courts. The Supreme Court also confirms the fundamental principle that any doubts should be interpreted in favour of enforceability and validity of the arbitration agreement. Importantly, the Supreme Court's assessment departs from the recent Russian court decision in Dredging and Maritime Management SA v. InjTransStroy AO in which an ICC arbitration clause was held to be invalid and unenforceable. The decision of the lower court was upheld by the Supreme Court. This decision raised substantial criticism and concerns in the arbitration community, and it appears that the Supreme Court's Review seeks to correct the position. The Supreme Court's general approach to interpreting arbitration agreements and the Review's specific comments on ICC arbitration clause specifically are very encouraging for users of arbitration.
- Hybrid or alternative arbitration clauses are valid The Supreme Court confirms that an arbitration clause allowing the parties to choose either to file a claim to the state court or initiate arbitration (a hybrid or alternative arbitration clause) is valid and enforceable as a matter of Russian law.
- "Asymmetrical" arbitration clauses are valid but the court will construe so as to give both parties the same rights. Arbitration clause allowing only one of the parties to choose between filing a claim to state court or initiating arbitration (an "asymmetrical" arbitration clause) is valid and enforceable, however the Russian courts will construe the clause in a way that preserves all parties' rights , i.e. all parties to the contract will be free to choose between arbitration and state courts irrespective of the wording of the contract. In other words, "asymmetrical" arbitration clauses will be construed as "symmetrical" clauses.
- Disputes under commercial contracts with state owned companies are arbitrable. This is in line with recent amendments to the Law on Arbitration which will take effect on 29 March 2019.
- Disputes under state procurement contracts are not arbitrable.
- Disputes arising from privatization are not arbitrable. A dispute arising from the transfer of state owned property to a private party, even if such transfer took place not as a matter of privatization procedures but rather under a commercial contract, is considered to be a privatization dispute and is not arbitrable.
- Challenge of arbitral awards. State courts are not allowed to review arbitral awards on any grounds, including on the merits, apart from those directly listed in Russian law and stemming from New York Convention 1958.