RUSSIAN MINISTRY OF JUSTICE CLARIFIES RUSSIAN ARBITRATION LEGISLATION UPON JOINT REQUEST OF HKIAC AND VIAC

In February 2020, the Hong Kong International Arbitration Centre (the “HKIAC”) and the Vienna International Arbitration Centre (the “VIAC”) jointly applied to the Russian Ministry of Justice (the “MOJ”) and the Council for the Development of Arbitration at the MOJ (the “Council”) for clarification of certain “grey areas” of Russian Arbitration legislation (the “Joint Request“). Both arbitration institutions have recently published the response issued by the Working Group No. 2 on Foreign Arbitral Institutions of the Council (the “Working Group”) on the questions posed in the Joint Request (the “Response“)[1]. Although the position in the Response was declared to be non-binding on the Russian courts, the Working Group’s views might impact Russian court practice on the reformed arbitration legislation.

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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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HKIAC BECOMES FIRST FOREIGN INSTITUTION ACCREDITED TO HEAR RUSSIAN CORPORATE DISPUTES

On 4 April 2019, the Hong Kong International Arbitration Centre (HKIAC) received approval to be recognised as a “permanent arbitration institution” in Russia. The HKIAC is the first foreign institution to receive such approval, which marks an unprecedented change in the Russian arbitration landscape. Obtaining the “permanent” status means that the HKIAC will be able to administer arbitrations which relate to certain Russian corporate disputes.

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Russian Arbitration Reform: Key Changes

On 1 September 2016, the following federal laws came into force in Russia: the Federal Law On Arbitration (Arbitration Proceedings) in the Russian Federation and the Federal Law on Amendments to Certain Legislative Acts which introduced a number of changes, in particular, to the Arbitrazh Procedure Code, the Civil Procedure Code and the Law on International Commercial Arbitration (collectively, the "Laws"). Russian arbitration regulation has materially changed as a result of these Laws.

The reforms were initiated in 2013 on the instruction of the President given to the Federal Assembly with a view to developing Russian arbitration legislation. Two of the main goals of the reforms were to:

  • Provide clearer and more detailed regulation of the arbitration process in order to encourage businesses to use arbitration as a dispute resolution mechanism more actively, decreasing the workload of the state courts;
  • Fight with so called "pocket" arbitration institutions (i.e. those which are incorporated by large corporations / banks to hear disputes with their counterparties).

The Laws have made many significant amendments, most of which can be placed under the following two categories: (1) the administering of arbitration proceedings; and (2) the arbitration process. This update deals with the most significant amendments.

 

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