Arbitrazh Court of Moscow seizes opportunity to apply arbitration-friendly approach to an ICC-arbitration clause

Background of the case (Case No. А40-156056/2019)

Codest Engineering S.R.L. (Codest) is an Italian construction company with substantial operations in Russia. It played a part in the construction of the VTB-Arena-Central Stadium “Dinamo” in Moscow. In 2016, Codest as a primary contractor entered into a sub-contract (the “Contract”) with a Russian company OOO “Zambelli” (Zambelli). Later in 2019, Codest served a notice of termination of the Contract and claimed penalties and damages. The Contract contained an ICC Stockholm-seat arbitration clause. To avoid ICC arbitration in Stockholm, Zambelli applied to Russian courts seeking the arbitration agreement to be declared void.

In the court proceedings, Zambelli argued that: (a) although the arbitration clause provided for arbitration under the ICC Rules, it does not unequivocally mean that the parties agreed on the ICC as an arbitration institution under whose auspices the dispute shall be entertained. Therefore, the arbitration clause is inoperative; and (b) only disputes stemming from trade contracts can be referred to ICC arbitration.

The Courts’ decisions

Courts of three instances found in favour of Codest, dismissing Zambelli’s application, holding that the wording of the arbitration clause leaves no doubts that the parties have agreed on ICC arbitration and there are no restrictions for disputes from construction contracts to be referred to arbitration.

In particular, the Court of Appeal held that the contract contains a standard ICC arbitration clause, which is generally recognized by Russian courts. The court also mentioned that it is a common practice in Russia, that construction disputes are resolved by ICC arbitration.

Overall, the intonation of the court’s reasoning in this case was definitely arbitration friendly and in clear contrast to the decision dated 08 February, 2018 (court case no. А40-176466/2017) where the same court held that the recommended ICC arbitration clause lacks clear agreement that the arbitration should be administrated by the Arbitration Court of the International Chamber of Commerce.

Final remarks

The Court of Appeal and the Cassation Court decided on this case after the publication of the latest Supreme Court’s Resolution on Arbitration of 10 December 2019 where the Supreme Court expressed a strong pro-arbitration bias (find our comments on the Resolution here https://kdb.legal/en/key-takeaways-from-the-recent-russian-supreme-courts-resolution-on-arbitration/). We believe that this case is one of the first signs that the Supreme Court’s message has reached lower courts.