The jurisprudence of Russian courts on recognition and enforceability of foreign arbitral awards in 2020 is still not homogeneous and the risk of surprising decisions remains. However, the number of decisions in which recognition and enfocement are refused on the grounds of ordre public violations is declining.
One of the reasons for this positive development is the recent plenary resolution No. 53 of the Supreme Court in December 2019. The Resolution adresses the state courts’ functions of domestic and international arbitration assistance and supervision. It aims at promotion of arbitration as one of several alternative dispute resolution methods. The national courts will have certain participatory and control functions, in particular in the establishment of the arbitral tribunal, in the procedures for challenge of an arbitrator, and in the collection of evidence as well as protective measures.
Overall, the Resolution confirmed that Russian courts should respect the parties’ agreement to submit their disputes to arbitration. The only condition: the mandatory requirements of Russian laws are met. The Supreme Court’s position comes as a relief as it provides for an arbitration-friendly environment.
Key Takeaways from the Recent Russian Supreme Court’s Resolution on Arbitration
Facts and procedure
On 8 June 2020 the Russian Supreme Court refused to accept a cassation appeal against a decision of the Ural District Arbitrazh court which in turn had confirmed the decision of the Arbitrazh court of Perm Region recognising and declaring enforceable an arbitral award of the Swiss Chambers‘ Arbitration Institution.
In the arbitral Award of the Swiss Chambers‘ Arbitration Institution dated 04.06.2019 „Soda-Chlorat“, company registered in Russia, was ordered to pay EUR 561.512,00 in favour of „Chemieanlagenbau Chemnitz GmbH“, Germany. Since „Soda-Chlorat“ did not voluntarily pay the dept, „Chemieanlagenbau Chemnitz GmbH“ requested the recognition and enforcement of the award at the Commercial Court of Perm Region. The Court recognised the award and declared it enforceable..
„Soda-Chlorat“ filed a complaint. The Respondent claimed, the recognition and enforcement of the foreign arbitral award would violate the ordre public of the Russian Federation, since it was issued by an arbitration tribunal that did not comply with the agreement of the parties. Moreover, the text of the arbitration clause of the contract does not coincide with the standard arbitration clause in the Swiss Rules of International Arbitration.
Furthermore, as „Soda-Chlorat“ indicates, despite the fact that its representative took part in the arbitration proceedings, the Respondent was not duly notified of the proceedings.
Supreme Court’s arbitration friendly decision
The contract provided for arbitration at the „Arbitration Tribunal of the Zurich Chamber of Commerce“. However, at the time of the conclusion of the contract (12.12.2012) there was no such arbitration institution as „Arbitration Tribunal of the Zurich Chamber of Commerce“. Since 2012 there is „The Swiss Chambers’ Arbitration Institution“, an independent entity, established by the Chambers of Commerce and Industry of Basel, Bern, Geneva, Laussane, Lugano, Neuchâtel and Zurich. The parties did not raise any objections at the time of the conclusion of the agreement and did not question the enforceability of the original arbitration clause. Thus, the court noted that this issue was fully in the competence of the arbitrators as it fell within the scope of the arbitration clause. In conclusion, „Soda-Chlorat“ took part in the proceedings, presented evidence, filed counterclaims and participated in the hearing. This indicates that the Respondent confirmed the validity and enforceability of the arbitration clause by performing the said actions.
Furthermore, the Arbitrazh court of Ural District seized the opportunity to quote some very arbitration friendly lines from the review of the plenary resolution No. 53 of the Supreme Court. In particular, the District court held:
„According to the preamble to the Review of Court Practice in Cases Related to Assistance and Supervision Functions for Arbitration Courts and International Commercial Arbitration, approved by the Presidium of the Supreme Court of the Russian Federation on 26.12.2018, arbitration and international commercial arbitration are an alternative method of dispute resolution, the important features of which are autonomy of will of the parties, confidentiality of the procedure and the possibility of its rules to be determined by the parties to a dispute, impartiality and independence of the procedure.“
This clear reasoning is especially encouring as it was the same court (Ural District) who had made a complete „révison auf fond“ in respect of a Hamburg Chamber of Commerce award just a year earlier (July 18, 2019) and refused enforcement:
Révision au fond: Anerkennung und Vollstreckung ausländischer Schiedssprüche in Russland
Further, according to the Supreme Court the Respondent’s argument that it was not duly notified of the arbitration proceedings contradicts the materials of the arbitration award. It is clear that a representative of the Respondent participated in the court hearing and took an active procedural position in the course of the dispute. As a result, the Supreme Court rejected the objections and upheld the lower court ruling.
The Supreme Court has confirmed its pro-arbitration Approach by referring to ist Review of Russian court practice relating to international and domestic arbitration, and the enforcement and recognition of Awards, issued on 26 December 201. The Review serves as a guideline for the state courts on potentially controversial areas of court practice. It covers a number of interesting points on arbitration and deals with them from the standpoint of party autonomy i.e. the basic right of commercial parties to agree on arbitration alternative to state courts.
Conclusion
The new case however reflects positive trends in the practice of enforcement of arbitral awards in Russia. In particular, it is in line with the arbitration friendly approach of the (old) Highest Arbitrazh Court. It had declared an arbitration clause in favour of „International Chamber of Commerce, Bremen“ valid, since there is just one „International Chamber of Commerce“ (the one in Paris). Thus there could not be any doubt about the fact which institution is meant.
Thus, the Supreme Court gradually strengthens arbitration as an alternative method of dispute resolution in commercial disputes. In particular, the Plenary Decision as of December 2019 emphasises the importance of arbitration in many respects and may lead to a more arbitration-friendly judicial practice.Alle Themen