9 The Enforcement of Arbitral Awards

This concluding chapter explores the enforcement of arbitral awards. There are two primary laws relevant to the recognition and enforcement of arbitral awards of international commercial arbitration in Russia: the Law on International Commercial Arbitration of 1993 and the Code of Commercial Court Procedure of 2002. The former has the basic provision on the recognition and enforcement of awards and the grounds for refusal, while the latter provides for the procedural aspects of recognition and enforcement of arbitral awards. It is an established principle of international commercial arbitration that in deciding whether enforcement of awards is allowed or not, courts are not entitled to review the case on its merits. However, Russian judges are not always aware of this fundamental rule, or do not comply with it. The chapter then looks at the grounds for the refusal of recognition and enforcement of arbitral awards and the way Russian courts interpret these grounds. Particularly important is the understanding of public order by Russian courts. Finally, the practice of ‘Russian Torpedo’ is discussed.

6 Arbitration Agreements

This chapter addresses arbitration agreements. The basis of arbitration is the arbitration agreement, which represents the intention of the parties to refer the dispute to arbitration. The court to which an action was taken on the subject matter of an arbitration agreement must terminate the procedure and refer the parties to arbitration, provided that either party applies for termination of the procedure not later than that party’s first submission on the merits of the case. This does not apply if the arbitration agreement is invalid, has lost effect, or is unenforceable. If an action was taken in court, the arbitration process may start, or continue, while the court is yet to decide on jurisdiction. The chapter considers the form of arbitration agreement, the court practice on arbitration clauses, and the scope of the arbitration agreement.

2 The 2015 Reform of Arbitration

This chapter discusses the 2015 Arbitral Reform. The arbitral reform, which started in 2011, culminated in two sets of laws adopted by Parliament and signed by the president on 25 December 2015. The package comprised the Law on Arbitration of the Russian Federation and the Law on the amendments to the Laws in relation to the adoption of the above law. The latter included amendments to the Law on Commercial Court Procedure and the Law on International Commercial Arbitration. On 27 December 2018, the Law on Arbitration was further amended. The power to grant license to perform functions of permanent arbitral institutions was shifted to the Ministry of Justice. One of the fundamental issues which were contested in the process of the reform was whether the existing regime of segregation of international and domestic arbitration should be abandoned altogether or should be maintained. With the strong opposition from experts of international commercial arbitration supported by the Codification Commission and the President’s Administration, the system of two separate laws, that is, the Law on Arbitration and the Law on International Commercial Arbitration, was maintained. However, organisational/institutional aspects of arbitration, including international arbitration, are now regulated by the Law on Arbitration.

8 Setting Aside of Awards

This chapter covers the setting aside of arbitral awards. Arbitral awards can be set aside only by the court of the place of arbitration. Courts of the Russian Federation have exclusive jurisdiction in deciding on applications for setting aside of arbitral awards made in the Russian Federation. Grounds for setting aside of awards are common with the grounds for refusal of recognition and enforcement of foreign awards. Breach of public order is one of the frequently quoted grounds by Russian parties. Setting aside of awards is an area where the relationship between the state courts and arbitration is demonstrated in a concentrated manner. The chapter, after looking at the statutory provisions, will analyse a series of decisions of the court on setting aside of arbitral awards. Russian parties which lost arbitration often applies to the court in the hope of having the award been set aside. There have been some controversial decisions of Russian courts in this respect.

1 The History of Arbitration in Russia

This introductory chapter provides a background to arbitration in Russia. The history of arbitration in Russia can be traced back to the seventeenth century. In 1831, the Statute on Arbitration was enacted. In this Statute, there were two different systems of arbitration: statutory arbitration and voluntary arbitration. Statutory arbitration was not based upon the parties’ free will. This was a system in which parties were mandated to choose arbitration because of the overloaded court docket. Voluntary arbitration, on the other hand, was based upon the agreement of the parties. Statutory arbitration was abolished by the Great Judicial Reform of 1864 and only voluntary arbitration remained in the Rules of Civil Procedure. However, after the Bolshevik Revolution, all laws of the Tsarist regime, including the Rules on the Civil Procedure, were abolished. Nevertheless, the decree on the court No. 1 of 1917 accommodated arbitration as a means of settling civil law disputes. There was no commercial arbitration under socialism, except for two institutions attached to All-Union Chamber of Commerce and Industry. The chapter then looks at arbitration after the collapse of socialism. After decades of confusion, as an outcome of the 2015 Arbitral Reform, relevant laws were substantially amended and a licensing system was introduced for arbitral institutions.

7 Arbitration Procedure and Assistance and Control by the Court

This chapter focuses on the arbitration procedure. The Russian Law on International Commercial Arbitration does not contain detailed provisions on the procedure of arbitration as is the case with the UNCITRAL Model Law. Parties may freely agree on the procedure of arbitration provided that the agreement is compatible with the Law on International Commercial Arbitration. In the absence of such an agreement, the arbitration tribunal may conduct arbitration as they find adequate, including deciding on the admissibility, relativity, and significance of evidence. Therefore, details of the procedure are determined by the institutional rules. The fundamental principle of arbitral procedure is the equality of the parties. Each party must be given every possibility of presenting their own case. The chapter then looks at the provisions on the assistance and control of arbitration by the court introduced by the 2015 Reform.

5 Impartiality and Independence of Arbitrators and Arbitral Institutions

This chapter assesses the concept of impartiality and independence. The Law on International Commercial Arbitration provides that the potential candidate for the appointment of an arbitrator must disclose any circumstances that may cause a well-grounded doubt regarding his impartiality or independence in writing. In cases where the competent court, appoints an arbitrator, in the absence of the agreement between the parties, the court must ensure that an independent and impartial arbitrator is appointed. Independence and impartiality in Russia are not issues limited to arbitrators. The core of the issue is the independence and impartiality of arbitral institutions.Independence is understood to be an objective state of an arbitrator in the absence of any relationship with a person or circumstances which affect the arbitrator’s decision. Impartiality means that the arbitrator is not, directly or indirectly, interested in the outcome of the case and does not have preference or other prejudice in relation to a party, his representative, expert, or witness. Russian courts have ruled on the impartiality and independence of arbitrators as well as arbitral institutions in an inconsistent manner. In 2010, the International Court of Commercial Arbitration (MKAS) adopted a document entitled Rules on Impartiality and Independence of Arbitrators. Apart from being a guidance for arbitrators and the parties, this document is expected to give guidance to the courts when facing an application for setting aside an award and the refusal of recognition and enforcement of awards of international commercial arbitration on the grounds of the absence of impartiality and independence.

3 Arbitrability of Disputes

This chapter examines the concept of arbitrability. Arbitrability is about whether a certain category of dispute is eligible for settlement by arbitration or should be reserved for state courts. The 1993 Law on International Commercial Arbitration provided that ‘disputes arising from contractual and other civil law relationships and other types of international economic relations, insofar as one of the parties is outside the country’, fall within the scope of this Law. Meanwhile, the 2002 Law on (domestic) Arbitration provided that any dispute arising from civil law relations could be handled by arbitration, unless otherwise provided by Federal law. Despite such provisions, Russian courts narrowly interpreted the scope of arbitrability. For example, disputes on real property were not arbitrable until the decision of the Constitutional Court in 2011. Since this decision, the focus was on the arbitrability of corporate disputes. The 2015 Reform acknowledged the arbitrability of corporate disputes with some exceptions and requirements. Some judges found a basis for non-arbitrability of certain disputes in the Code of Commercial Court Procedure (APK).

4 Arbitral Institutions

This chapter focuses on arbitral institutions. After the new Law on Arbitration came into effect on 1 September 2016, permanent arbitral institutions are to be established in accordance with the amended Law. The problem was what was going to happen to the existing arbitral institutions after the Arbitral Reform. The Law provides that existing arbitral institutions that do not fulfil the requirement of the Law and thus did not receive a licence are not entitled to administer arbitration. On 1 November 2017, a vast majority of the existing arbitral institutions failed to meet the requirements of the Law on Arbitration, namely the requirement that they be set up by a non-commercial organisation, and ceased operation. There are now only two permanent arbitral institutions in Russia. Chapter 9 of the Law on Arbitration accommodates detailed rules on the organisational aspects of permanent arbitral institutions. This is different from the system before the 2015 Reform, which had almost no regulation in this respect. Chapter 9 is applicable not only to arbitral institutions which handle domestic arbitration, but also to international commercial arbitration. The chapter then looks at the institutional rules of arbitration as well as the rules on the administration of arbitration.