In 2018 FC Dynamo Moscow confirmed the hire of Ghanian central midfielder Adbul Tetteh as part of ca.€1.2m move from Polish Ekstraklasa side Lech Poznan. The transer was confirmed, but the club failed to pay. Known for its recent financial struggles, the FC also failed to pay €350,000 to the English Lucid Sports Group Ltd for the preparation of transfer.
Background of the case
Lucid Sports Group sued FC Dynamo Moscow in CAS arbitration. On 24 September 2019, the CAS granted the English company’s claims. FC Dynamo Moscow was ordered to pay €350,000 as well as interest. The football club argued that there was no arbitration agreement between the parties and did not participate in the proceedings.
Lucid Sports Group Ltd then applied to the Arbitrazh Court in Moscow for recognition and enforcement of the CAS decision in the Russian Federation.
In June, the Moscow Arbitrazh Court dismissed the request of Lucid Sports Group; in September the ruling was upheld by a higher court, later the English company (unsuccessfully) tried to challenge these rulings in Russia’s Supreme Court.
The ambiguous arbitration clause
Russia’s Supreme Court refused to recognize and enforce the decision of the Court of Arbitration for Sport (CAS). It confirmed the argumentation of the Arbitrazh Court of Moscow. The Arbitrazh Court examined a copy of the fee contract of 22.01.2018 submitted to the case, which was drawn up in Russian. Clause 6.3 stated that all disputes under the contract shall be settled by negotiations. If the disputes cannot be resolved through negotiations, they shall be referred to the Moscow Arbitrazh Court. If the case is referred to CAS, the dispute will be heard in English by a single arbitrator.
The parties initially stipulated that the law of the Russian Federation shall apply to the parties’ relations under this contract.
Given the absence of the original contract and its ambiguous wording, as well as conflicting conclusions of the parties, the court was guided by paragraph 11 of the Resolution of the Plenum of the Supreme Arbitrazh Court of the Russian Federation of 14.03. 2014 N 16 “On freedom of contract and its limits”. According to the Plenum if the terms of the contract are unclear and it is impossible to establish the actual common will of the parties taking into account
- the purpose of the contract,
- the negotiations preceding its conclusion,
- correspondence between the parties,
- practice established in the mutual relations of the parties,
- customs, as well as
- subsequent conduct of the parties to the contract
the court interpretation of the contract should be in favour of the party that prepared the draft contract or suggested the wording.
The court considered that Moscow was the place of signing, the applicable law was Russian law, the text of the contract was in Russian only and had no English wording.
The court further found that the parties’ initial expression of will to hear the dispute by an alternative means was not supported by the case file, no correspondence between the parties or exchange of documents confirming an agreement to refer all disputes arising out of that agreement to CAS was submitted. No letters from the parties, other than those submitted by the interested party, refuting his arguments have been submitted by the applicant.
Violation of Ordre Public
The Supreme Court concluded that there was no evidence that the parties had agreed that CAS was the proper venue for the settlement of their disputes. Therefore, enforcement of the CAS decision would have been contrary to the national public policy (ordre public), since the dispute of the parties was settled by an international commercial arbitration body having no jurisdiction over the matter.
Conclusion
The findings of the Russian courts that there was no valid arbitration agreement seems well reasoned. However, the reference to a violation of ordre public might not have been necessary, given that the absence of a valid arbitration agreement is a ground for refusal of recognition and enforcement of foreign arbitral awards explicitly named in the New York Convention. Arguably, an award rendered in the absence of a valid arbitration clause also violates public policy, although it would not be strictly necessary to refer to that provision. This decision again confirms that Russian courts consider the public policy exception much more as a common remedy and usually do not refer to the exceptional character of this defence.