Summary of the Top Trends in the Russian court practice in arbitration and international judicial proceedings 2019
In June 2020 the working group “Monitoring of Russian state courts practice’’ of Russian arbitration association published the “Review Russian court practice in arbitration and international judicial proceedings 2019” (Review).
The Review demonstrates trends following from the Russian court practice to date. They will be discussed below.
Violation of public policy as a ground for refusal of recognition and enforcement of arbitration awards
The increasing number of grounds for recognition and enforcement of arbitral awards are growing as the contrary to public policy
This tendency has negative effect on confidence in the Russian judicial system[1]. However, it is important to understand, that the Russian judicial system applies this clause fairly. In one of such cases, the court found that the arbitral award had been rendered by domestic arbitration tribunal upon the dispute arising from unconscionable contract, which is contrary to public policy.
The arbitral award was not recognized and enforced under formal grounds the contradiction to public policy. The prime example of this trend is failure to recognize arbitration awards of ICAC at the Ukrainian CCI.
Category “the contradiction to public policy” has been limited by Russian courts
Now Russian courts name the list of circumstances, which are excluded from the category “the contradiction to public policy”[2].
Examples:
1) rejection of the request for the evidences is not contrary to Russian public policy;
2) If a party disagrees with how a tribunal applies laws on the limitation period, this does not constitute proof that the award violates the public policy of the Russian Federation.
Trends in the Russian court practice for the various categories of cases
Disputes relating to procurement of goods, works and services by state legal entities are arbitrable if a contract does not include element of the public interest.
In July 2018, the Supreme Court held that the non-arbitrability of public procurement contracts does not affect regular procurements made by legal entities (including state-owned enterprises)[3].
Therefore, the paramount example of this legal approach is the Decision of the Arbitrazh Court of Moscow District, 5 February 2019 Case №A40-216210/2017, where the court found[4]:
1) Participation in a contract with a state-owned enterprise does not automatically mean that the contract is a public procurement contracts and cannot include an arbitration clause;
2) The public procurement contracts with non-budgetary financing does not comply with the necessary criterion for this dispute to be deemed as non-arbitrable.
Interestingly, the Moscow district Arbitrazh Court did not resolve the issue of qualification of disputes from the procurement relationship in public interests as non- arbitrable or arbitrable.
In future, possibly, we will see the differentiation of term «procurement» and «procurement relationship in public interests». In this case, the procurement process will be considered as arbitrable and procurement relationship in public interests will be deemed as non-arbitrable.
A writ of execution for court decision on admission of creditor’s claims will not be issued until either the debtor is declared bankrupt or the bankruptcy proceedings are terminated
According to the court practice the application of recognition and enforcement of arbitral awards made by a creditor must be satisfied. However, the issue of an enforcement order for compulsory execution of such award remains controversial[5].
For example, in case A06-11201/2018 the court stated that the application of recognition and enforcement of arbitral awards made by a creditor does not lead to the issuance of a writ of execution.
Trends in the Russian court practice of recognition and enforcement of court’s awards
Russian courts refer to international agreements on legal relations civil, family and criminal cases in recognizing and enforcement of court’s decision in economic disputes
For example, a court enforced an award on the corporate dispute based on the Agreement on Legal Assistance in Civil and Criminal Matters concluded between the USSR and the Republic of Cyprus. It is known fact that such agreements have a limited scope (usually civil and criminal disputes) of application, and cannot be extended to economic disputes, including corporate ones. The legal practice demonstrated in the current case this might be reversed[6].
Sharing the burden of establishing content of the applicable Law between parties and the court
The courts become more active, when they need to understand the foreign law and the way to apply foreign law[7].
The higher courts invalidate the decision of lower courts for failure to perform the obligation to establish the foreign law. For example, in case № А83-15890/2017 the decision of lower court was invalidated due to non-application of Canadian law (New Brunswick Province).
Anastasia Vantseva
Member of the RAA working group “Monitoring of Russian state courts practice’’
[1] Decision of the Arbitrazh court of the North Caucasus District, 15 May 2019, Case №A32-19574/2018 p. 12; Decision of the Arbitrazh court of the Ural District, 8 May 2019, Case №A07-31278/2018; Decision of the Arbitrazh Court of the Moscow District, 21 May 2019, Case №А41-90912/2018 p. 32; Decision of the Arbitrazh Court of the Moscow District, 14 June 2019, Case №А40-217844/2018 p.34.
[2] Decision of the Judicial Board on Civil Disputes of the Supreme Court of the Russian Federation, 3 September 2019, Case №44-KG19-11 p. 6; Decision of the Arbitrazh court of the Central District, 27 May 2019, Case No. A54-10174/2018, p. 12-13
[3] More about 2018 year: http://kkplaw.ru/en/supreme-court-of-russia-clarifies-arbitrability-of-procurement-disputes/
[4] Decision of the Arbitrazh Court of Moscow District, 22 January 2019, Case №А40-64096/2018 p. 21; Ruling of the Arbitrazh Court of the City of Moscow, 13 June 2019, Case №A40-7421/2019 p. 27.
[5] Decision of the Arbitrazh Court of the Moscow District, 27 November 2019, Case № A40-111339/2018 p. 7; Decision of the Arbitrazh Court of the Volga District, 17 September 2019, Case №A06-11201/2018 p. 8-9.
[6] Decision of the Arbitrazh Court of the of the Moscow Circuit, 1 April 2019, Case № А40-188140/2018 p. 44.; Decision of the Arbitrazh Court of the Volga region, 23 December 2019, Case № А12-20691/2019, p. 59. and e.t.c.
[7] Decision of the Arbitrazh Court of the Central Circuit, 16 October 2019, Case № А83-15890/2017 p. 68; Decision of the Arbitrazh Court of the Central Circuit, 27 September 2019, Case № А54-9783/2017, p. 69-70.