The annual number of disputes involving foreigners considered by the Russian arbitrazh courts is increasing. But there were not any legal certainty of judicial practice on proceeding of the relevant cases with application of the Section V of the Commercial Procedural Code of the Russian Federation.

In the beginning of May 2013 The Supreme Commercial Court of the Russian Federation (hereafter – SCC of Russia) published the informative letter draft of the Presidium on the approval of the judicial practice review on issues connected with proceedings conducted by arbitrazh courts involving foreigners (hereafter – the Draft) for the further discussion.

The Draft focuses on five main issues of law-establishment:

1. The jurisdiction of arbitrazh courts of the Russian Federation in cases involving foreigners;
2. The special cases of choice-of-law determination;
3. The problems of foreign law application;
4. The problems of the determination of legal status of foreigners;
5. The special cases of interim relief application by arbitrazh courts on cases involving foreigners.

Regarding the determination of the jurisdiction of arbitrazh courts of the Russian Federation in cases involving foreigners SCC of Russia provides the following:

  • Agreement concluded between foreigners, in which it has been stated that the arbitrazh court of the Russian Federation is competent to consider any current or future disputes between them will be considered as jurisdiction agreement in accordance with the clause 249 of the Arbitrazh Procedural Code of the Russian Federation;
  • Prorogation agreement shall be considered valid and enforceable, under which disputes of the parties should be considered in a court of the future respondent (or applicant);
  • Domestic jurisdiction of Arbitrazh courts in regard to the dispute shall be based on the Arbitrazh Procedural Code of the Russian Federation, if there is no any references to the particular courts in the prorogation agreement, which is concluded in favour of the particular court of the Russian Federation;
  • Imperative provisions of the Arbitrazh Procedural Code of the Russian Federation establishes the competence of the arbitrazh courts disputes cannot be changed by concluding the prorogation agreement;
  • Prorogation agreement follows the fundamental right to claim and remains in effect against promisor and new promisee in case of assignment of claim, concerning disputes assumed from the agreement under authority of which  current prorogation agreement is concluded;
  • In case  of  unequal dispute resolution agreements wherein only one of contracting parties empowered to pursue the litigation in the state court of competent jurisdiction that is alternative to arbitration proceedings, while another party deprived of such right, the party entitled to bring a court action in relevant state court on equal grounds;
  • In the presence of  the party’s claim on existence of concluded, executed and valid agreement on dispute resolution by foreign state court, statement of claim has to be dismissed without consideration;
  • The intention of the party to consider the dispute in particular court shall be confirmed by lack of objections on court jurisdiction up to  the first statement in respect to the case;
  • Existence of close connection of the case establishes in each particular case.

Arbitrazh Procedural Code of the Russian Federation provides with two following variants of the informative letter wording of the Draft for public discussion in respect to the determination of the jurisdiction of the arbitrazh courts according the clause 2 of article 247 of the Arbitrazh Procedural Code of the Russian Federation:

  1. First: Legal cases pertain to the competence of arbitrazh courts in case of management body, subsidiary or representative office of foreign legal entity existence within the territory of the Russian Federation, if the claims of the legal entity are resulted from the activity of its management body, subsidiary or representative office of legal entity.
  2. Second: Legal cases pertain to the competence of arbitrazh courts in case of management body, subsidiary or representative office of foreign legal entity existence within the territory of the Russian Federation notwithstanding that claims of legal entity is resulted from the activity of this its management body, subsidiary or representative office of legal entity, as follows:

Important approaches were also connected with the conflict-of-laws resolution issues arising from the consideration of the cases, as follows:

  • Requirements to rely upon norms of the international agreement of the Russian Federation, if there is relevant conflict-of-law provisions that determines the applicable law;
  • Selection by the parties of any foreign court as a competent for dispute resolution per se does not mean the selection of substantive law of the foreign state as applicable law to the case;
  • Agreement on choice of law can be recognized concluded in case of presence of reference in procedural documents to the same applicable law, provided by parties. Parties entitled to use any terms and statements, which indicates the of one or another governing law;
  • Extra imperative provisions of the Russian Federation legislation (article 1192 of the Civil Code of the Russian Federation) shall be applicable by the court under all circumstances irrespective of law, which was recognized as applicable by the parties.

It is necessary to notice following recommendations, concerning issues of establishment of foreign law provisions:

  • Obligation to provide the information on content of foreign law (evidence of foreign law) can be imposed on parties by relevant court ruling.
  • In case of breach of imposed duty on provision of the information concerning foreign law, party is not entitled to invoke to failure to determine foreign law on the understanding that arbitrazh court has assumed sufficient measures.
  • Parties are entitled to provide expert’s opinion on foreign law content for the purpose of foreign law content determination;
  • Foreign law content is considered established on condition that  corresponding expert opinion provided by either party does not disposed by another party and contains necessary and sufficient information;
  • Arbitration court empowered to apply for interpretation to the authorized bodies or to call on corresponding experts  on the grounds of existence of contradictory information;
  • Judicial act is subject to be changed or reversed in case of court failure to discharge duties or improper  duties discharge on establishment of foreign law content made by court;

In the matter of establishment foreign entity status Presidium of the Supreme Commercial Court of the Russian Federation submits following approaches.

  • Application rules of personal law in establishment of foreign legal entity status, legal standing and legal capacity;
  • Evidence supporting entity permanent place of residence for the purpose of taxation does not  considered as legal evidence for establishment of personal law;
  • Official documents that confirm foreign legal entity status should come from the authorized foreign state body and contains actual information as from the date of  adjudication and also ought to be verified, legalized, apostilled and translated into Russian language in a proper manner;
  • Legal inscription or apostille, which verifies official legal documents identity that  confirms legal entity status should  be awarded on original documents;
  • Power of attorney on behalf of foreign person that was issued in written form in the territory of foreign state does not required compulsive legalization or apostille placement;
  • Foreign legal entity title should be considered in various languages (which includes official state language of personal legal entity law by means of transliteration in translation).

Draft also touches upon some disputable issues concerning application of interim measures by the court;  

  • Corresponding interim measures could be assumed by arbitrazh court at place of residence or location of debtor or at location or debtor’s property on condition that dispute is pertain to the competence of foreign international commercial arbitration;
  • Corresponding interim measures could be assumed by arbitrazh court only if he strictly empowered by efficient jurisdiction that is location of applicant or at location of monetary assets or property or at location of applicant place of rights infringement on the condition that case is considered on the  merits in the foreign state court;
  • Foreign court orders of legal assistance rendering in form of recognition and enforcement of it’s assumed interim measures should not be satisfied by arbitrazh court;
  • Interim measures in form of prohibition on participation in consideration within courts of the Russian Federation that was assumed by foreign court does not prevent authorized Russian court adjudication.

Consequently, uniform executor’s approach of law represented in that project affords to contribute legal certainty during consideration of a great number of the cases with the involvement of foreign entities.

Besides, Supreme Commercial Court recommendations are capable to give guidance for arbitrazh courts on range of law matters that has been considered disputable by both theoretician and practician for a long period of time.

Herein, it is exemplary to render this project on public consideration in order to implement new recommendations it is necessary to have a notion about business community readiness to support and comply with them. Final draft consideration will take place on Presidium of Supreme Commercial Court 6 June, 2013.