RUSSIAN ARBITRATION REFORM: RECENT AMENDMENTS AND PRACTICAL IMPLICATIONS

On 29 March 2019, a series of amendments to Federal Law No. 382-FZ “On Arbitration (Arbitration Proceedings) in the Russian Federation” came into force. The amendments, which were predominantly introduced by Federal Law No. 531-FZ of 27 December 2018 (the “Amending Law“), are an attempt to address various issues that have arisen from the implementation of the 2016 Russian Arbitration Reform over the past three years.

The Amending Law focuses primarily on the Permanent Arbitration Institutions regime (the “PAI Regime“) and the arbitrability of corporate disputes. It imposes even tighter restrictions on arbitration institutions operating in Russia without “permanent arbitration institution” (“PAI“) status. In relation to a narrow category of Russia-related transactions, careful thought should be given before choosing a non-PAI institution, in particular where disputes are likely to need to be enforced inside Russia.

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WIND OF CHANGE IN RUSSIAN ARBITRATION: REVIEW OF SUPREME COURT CLARIFICATIONS

The Russian arbitration landscape is undergoing some major changes. Just a few years ago, in 2016, the arbitration regime in Russia was radically reformed with clarifications around the use of arbitration in corporate disputes, and the introduction of an accreditation regime for “permanent arbitration institutions”. While these reforms were aimed at strengthening the legitimacy of commercial arbitration in Russia, two years later, in the Autumn of 2018, arbitration practitioners and representatives of the business community in Russia were left concerned by several Russian court decisions which seemed to indicate that the standard ICC clause may not be enforceable in Russia (see our blog post on the decisions here). However, 2018 ended on a more positive note. On 26 December 2018, the Russian Supreme Court (the “SC“) issued its guidance in relation to various issues concerning international commercial arbitration (the “Overview“), where, in particular, it confirmed that arbitration clauses recommended by arbitration institutions are valid. On the following day, the Russian President signed a Federal Law modifying the current arbitration regime, which entered into force on 29 March 2019.

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ENFORCING FOREIGN ARBITRAL AWARDS IN RUSSIA: SURVEY FROM THE RUSSIAN ARBITRATION ASSOCIATION

In late November 2018, the Russian Arbitration Association (“RAA”) published a detailed study on the application of the New York Convention in Russia between 2008 and 2017. The Working Group of the RAA analysed 10 consecutive years of case law on the recognition and enforcement of foreign arbitral awards in the Russian courts. The study provides valuable statistical data on the success rates of Russian enforcement proceedings under the New York Convention and uncovers interesting trends for those looking to enforce in the jurisdiction.

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ICC modifies standard arbitration clause to make explicit reference to the ICC International Court of Arbitration

As discussed in our recent blog post, the Moscow Arbitrazh Court and appeal courts recently found that a reference to the arbitration rules of an arbitral institution was not sufficiently clear evidence that the parties had agreed on that specific institution to administer the resolution of their disputes. The case related to the ICC standard arbitration clause and the ICC has applied to the Russian Supreme Court for clarity on its approach.

However, in the meantime, the ICC has issued an additional modified standard arbitration clause “to take account of the requirements of national laws and any other special requirements that the parties may have“. The ICC then proceeds to state that it is “prudent” for parties wishing to have an ICC Arbitration in Mainland China or in Russia “to include in their arbitration clause an explicit reference to the ICC International Court of Arbitration“.

The modified clause proposed by the ICC is as follows:

“All disputes arising out of or in connection with the present contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce and shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”

For further information, please contact Alexei Panich, partner, Nick Peacock, partner, Alexander Khretinin, senior associate, or your usual Herbert Smith Freehills contact.

Alexei Panich
Alexei Panich
Partner
+7 49 5363 6515
Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803
Alexander Khretinin
Alexander Khretinin
Senior Associate
+7 49 5783 6777

The ICC standard arbitration clause potentially invalid in Russia

According to Russian media, the ICC has recently applied to the Russian Supreme Court (“SC“) asking that it clarify the approach of Russian courts to the ICC standard arbitration clause demonstrated in one of their cases (No. A40-176466/17). In this case the Moscow Arbitrazh Court and appeal courts (including the SC), found that a reference to the arbitration rules of an arbitral institution was not sufficiently clear evidence that the parties had agreed on that specific institution to administer the resolution of their disputes.

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SIAC signs Memorandum of Understanding with the Institute of Modern Arbitration of the Russian Federation

The last two years have seen considerable development of Russian arbitration law and practice, with changes to Russian arbitration law intended to enhance Russia’s market reputation as an arbitration-friendly jurisdiction.  In a further development, it was recently announced that the Singapore International Arbitration Centre (SIAC) and the Institute of Modern Arbitration (IMA) of the Russian Federation have entered into a Memorandum of Understanding intended to support and promote the development of international arbitration in Singapore and Russia. Continue reading