I INTRODUCTION

The practice of resolving disputes through arbitration is undergoing rapid development in Russia. The arbitration system does not form part of the Russian judicial system, and thus provides an alternative form of dispute resolution. However, arbitration and the system under the state courts, despite all their differences, are in general equally recognised as instruments of civil rights protection, performing one and the same function of justice.

There are two types of commercial arbitration in Russia: international commercial arbitration and domestic arbitration. Separate laws have been developed with respect to both.

International commercial arbitration is governed by the Law on International Commercial Arbitration dated 7 July 1993 (ICA Law),2 which is based on the Model Law on International Commercial Arbitration, adopted in 1985 by the United Nations Commission on International Trade Law (UNCITRAL Model Law). Amendments to the ICA Law were adopted on 29 December 2015 (see below), and came into force on 1 September 2016.

Until 2016, the rules and regulations for domestic arbitration were set by the Law on Arbitration Courts dated 24 July 2002.3 On 29 December 2015, a new Law on Arbitration (Arbitration Proceedings) No. 382-FZ was adopted (see below), which regulates domestic arbitration in Russia starting from 1 September 2016. Certain rules of the new Law are also applicable to international commercial arbitration having its seat in Russia.

In the context of the enforcement and challenge of arbitral awards within Russia, the Commercial Procedural Code of the Russian Federation (CPC), which was adopted on 14 June 2002, must also be mentioned.

i International commercial arbitration

The ICA Law applies to international commercial arbitration if the seat of arbitration is in Russia. If the seat of arbitration is abroad, the ICA Law applies to such arbitration in specific cases provided by the ICA Law, such as for the enforcement and challenge of arbitral awards, the obligation of a state court to consider a claim that is subject to an arbitration agreement until one of the parties invokes such agreement, and taking interim measures in support of arbitration.

The main criterion qualifying arbitration proceedings as international is the presence of a foreign element in the dispute.

The revised version of the ICA Law that entered into force on 1 September 2016 modified the jurisdictional scope of the ICA Law. In particular, in line with the similar Article 1(3)(b)(ii) UNCITRAL Model Law provision, the ICA Law provides that a dispute can be referred to international commercial arbitration if 'any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected' is situated outside Russia. At the same time, these amendments removed the entitlement of Russian enterprises with foreign investments or their foreign shareholders to refer internal disputes to international arbitration, leaving place only for 'disputes arising out of foreign investments on the territory of the Russian Federation or Russian investments abroad'. The latter change has been made in view of certain restrictions imposed on arbitrating corporate disputes as described below.

The amended Law also provides that disputes involving foreign investors in connection with foreign investments on Russian territory or pertaining to Russian investments abroad, which are not covered by the above provisions of the Law, could be submitted to international arbitration in cases where it is so envisaged in international agreements to which Russia is a signatory or in Russia's federal law.

Pursuant to Article 16(3) of the ICA Law, an arbitral tribunal is entitled to choose to examine the question of whether it has jurisdiction before considering the case on its merits as a preliminary issue or at the same time as it makes its final award on the case.

This gives the tribunal the opportunity to take each case into consideration individually, and to weigh up the dangers of spending significant time and expense on unnecessary arbitration proceedings (if the decision on jurisdiction is retained until the issuance of the award on the merits). The ICA Law sets a time frame for judicial review of an arbitral tribunal's decision on its jurisdiction. If a separate decision on jurisdiction is made as a preliminary issue under Article 16(3) of the ICA Law, this decision can be disputed in a state court within one month of the party's receipt of such decision.4

According to the previous version of the ICA Law, a ruling of a state court issued upon examination of an arbitral tribunal's decision on its jurisdiction was not subject to appeal. While this wording was deleted from the amended version of the Law, it now appears in the amended Article 235(6) of the CPC. Pursuant to Article 16(3) of the ICA Law, while a decision on jurisdiction is examined by a state court, the arbitral tribunal may continue with the proceedings and make an arbitral award.

The restated Article 235(4) of the CPC further provides that if an award on the merits is rendered prior to consideration of the jurisdictional challenge by the state court, the court shall dismiss the challenge without prejudice to the claimant's right to raise its jurisdictional objections within the framework of procedures for annulment of the award or resisting its enforcement.

The ICA Law does not provide for a challenge in a state court of a tribunal's negative decision on jurisdiction to consider a dispute rendered as a preliminary issue. While such decision is not necessarily a final decision on the issue, an arbitral tribunal cannot be forced to examine a dispute.

The ICA Law provides for an exhaustive list of grounds on which an arbitral award may be set aside, basically reproducing the language of Article 5 of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (New York Convention). It should be noted that in general, state courts do not examine a case on its merits and do not oversee the reasoning of arbitral awards. The majority of grounds for setting aside an award are based on procedural breaches that have occurred within the course of the arbitral proceedings, and have to be proved by a party. An arbitral award may be set aside by the state court if:

  1. the party making the application for setting aside furnishes proof that:
    • a party to the arbitration agreement was incapacitated, or the said agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereof, under Russian law;
    • a party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present its case;
    • the award was made regarding a dispute not contemplated by or not falling within the terms of submission to arbitration, or contains decisions on matters beyond the scope of submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those on matters not so submitted, only the part of the award that contains decisions on matters not submitted to arbitration may be set aside; or
    • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of the ICA Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with the ICA Law; or
  • the court finds that the subject matter of the dispute is not capable of settlement by arbitration under Russian law, or the award is in conflict with Russian public policy.

The grounds for refusing recognition or enforcement of an arbitral award are almost the same as for the annulment of the award. Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only:

  1. at the request of the party against whom it is invoked, if that party furnishes proof to the competent court where recognition or enforcement is sought that:
    • a party to the arbitration agreement was incapacitated in some manner or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under the law of the country where the award was made;
    • the party against whom the award was made was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present its case;
    • the award was made regarding a dispute not contemplated by or not falling within the terms of submission to arbitration, or it contains decisions on matters beyond the scope of submission to arbitration, provided that if the decisions on matters submitted to arbitration can be separated from those on matters not so submitted, that part of the award that contains decisions on matters submitted to arbitration may be recognised and enforced;
    • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
    • the foreign award has not yet become binding on the parties, or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or
  • if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under Russian law, or the recognition or enforcement of the award would be contrary to Russian public policy.

ii Domestic arbitration and domestic arbitration institutions

It should be noted that the applicable Russian law provides for two types of arbitration: institutional arbitration and ad hoc arbitration (arbitral tribunals established for the resolution of a particular dispute). Permanent arbitration institutions have a permanent location and their own rules determining the procedure for arbitration proceedings, and do not terminate their activities when the examination of a particular case is complete. An ad hoc tribunal is created for the resolution of a single dispute, and after the dispute's resolution is dissolved. There is no defined location; the proceedings are held at a location determined by agreement of the parties or by the ad hoc tribunal itself. The procedure for this type of arbitration proceeding, as a general rule, is determined by rules selected by the parties, with any deviations that the parties may agree upon.

The amendments to the legislation on arbitration that took effect on 1 September 2016 draw a fundamental distinction between the status of institutional arbitration and ad hoc tribunals. In particular, in ad hoc arbitrations a tribunal would not be authorised to consider corporate disputes, the parties cannot seek the assistance of the courts in collecting evidence and cannot agree on the finality of the award (as explained below), which limits a court's intervention in an arbitration in the form of setting an award aside. Following the completion of an ad hoc arbitration, the tribunal must deposit the entire file with an arbitral institution the parties have agreed on or, in the absence of such agreement, with the state court at the place of potential enforcement.

The new Law on Arbitration also introduced significant amendments to the functioning of institutional arbitration. One of the key novelties of the Law is that it has become considerably more difficult to form arbitration institutions in Russia.

Permanent arbitration institutions can now be created only as non-profit organisations, and will be able to engage in their activity only provided they obtain an authorisation from the Ministry of Justice granting them the right to perform the functions of an arbitration institution. Such approval shall be adopted on the basis of a recommendation of the Council on Arbitration Development.

To obtain a governmental authorisation, an arbitral institution must ensure:

  1. that its rules and list of recommended arbitrators5 are in compliance with the provisions of the Law on Arbitration;
  2. the accuracy of the information provided with respect to the founding non-profit organisation; and
  3. that the effective management and financial sustainability of the arbitral institution could be supported by the reputation and activities of the founding non-profit organisation.

A foreign arbitral institution is also required to obtain an authorisation to act on Russian territory, but the only requirement for obtaining such authorisation is its internationally recognised reputation. If the foreign institution fails to obtain an authorisation, arbitrations seated in Russia that it administers will be deemed ad hoc. This will entail certain negative consequences, as described above. To our knowledge, as at 25 April 2019, the only foreign arbitral institution that had obtained a state authorisation was the Hong Kong International Arbitration Centre.

Further, the Law on Arbitration allows the forced dissolution of an arbitration institution on the basis of a decision of a state court in cases of repeated gross violations of the Law on Arbitration that have caused substantial damage to the rights of the parties to arbitration or of third parties.

As at 1 April 2019, only four Russian arbitral institutions had obtained a state authorisation, two of which were granted this right by federal law:

  1. the International Commercial Arbitration Court (ICAC)6 at the Chamber of Commerce and Industry of the Russian Federation in Moscow;
  2. the Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation;
  3. the Arbitration Centre at the Russian Union of Industrialists and Entrepreneurs; and
  4. the Arbitration Centre at the Institute of Modern Arbitration.

Arbitration awards rendered after 1 November 2017 under the auspices of such non-authorised institutions will be considered as breaching the arbitral procedure set by the law, and thus will be susceptible to being set aside or having their enforcement refused. All arbitral cases commenced at such institutions prior to 1 November 2017 will be re-qualified into ad hoc arbitrations, with the respective restrictions described above applicable to such cases. Arbitration agreements that provide for the settlement of disputes at non-authorised institutions will be considered as non-enforceable, and parties are advised to conclude new arbitration agreements, choosing one of the approved arbitral institutions.

The number of approved arbitral institutions is rather surprising, given that before the reform several thousand institutions existed.7 However, it should be kept in mind that one of the main purposes of the reform was to eliminate 'pocket' arbitral institutions. The founders of such institutions frequently imposed on their counterparties arbitration agreements providing for arbitration under the auspices of their own institutions, thus compromising the principle of independence of the arbitration process. However, some arbitral institutions complained that the procedures imposed by the state authorities were overly formalistic and not in accordance with the law. The institutions also blamed the Council on Arbitration Reform – created under the auspices of the Ministry of Justice for the consideration of applications – for delaying the process of authorisation and breaching the law provisions during the consideration process. A number of the institutions that existed before the reform decided to appeal their refusal of an authorisation to the state courts. It is to be hoped that the authorisation procedure will be further elaborated and the list of the approved institutions enlarged.

Compared to the Law on Arbitration Courts, the new Law regulates in more detail the procedure for considering arbitration disputes and changes in the procedure for appointing arbitrators. It also clarifies the arbitrator requirements (in particular, by setting a minimum age requirement of 25).8

The major arbitration institution in Russia is the ICAC. The ICAC is an independent and permanent arbitration institution operating in accordance with the ICA Law and the Statute on the ICAC annexed to the ICA Law. Under the Law on Arbitration, the ICAC is exempt from the requirement to obtain a government authorisation.

Following the recent reform of the arbitration law in Russia, in early 2017 the previous ICAC Rules were replaced by a set of rules governing the procedure in the ICAC depending on the type of the dispute, and in particular the Rules of Arbitration Relating to International Commercial Disputes, the Rules of Arbitration Relating to Domestic Disputes and the Rules of Arbitration Relating to Corporate Disputes. The last establish specific rules that are applicable in the resolution of both domestic and international corporate disputes. For issues not governed by these Rules, the provisions of the rules regulating international commercial arbitration or domestic arbitration shall apply respectively.

II THE YEAR IN REVIEW

i Developments affecting international arbitration

As discussed above, major changes were introduced in 2015 and 2016 to the legislation governing arbitration in Russia, including the CPC and the ICA Law, by way of adoption of Federal Law No. 409-FZ dated 29 December 2015.

While the Law on Arbitration primarily governs domestic arbitration in Russia, some of its provisions are applicable to international commercial arbitrations if the place of arbitration is Russia. For instance, the following provisions of the Law on Arbitration shall equally apply to international arbitrations taking place in Russia under Article 1(2) of the ICA Law:

  1. the creation and activities of permanent arbitral institutions administering international commercial arbitration on Russian territory;
  2. the storage of case materials;
  3. changes introduced into public and publicly significant registers in Russia on the basis of decisions of arbitral tribunals;
  4. the relationship between mediation and arbitration; and
  5. requirements for arbitrators, and the liability of arbitrators and permanent arbitral institutions, within the framework of international commercial arbitration.

Among other changes, the amended ICA Law (as well as the Law on Arbitration) envisages that the state courts in a number of cases provide assistance to arbitration by performing certain functions. For example, a party to arbitration proceedings may file an application with a state court to request the appointment, dismissal or challenge of an arbitrator, or request the court's assistance in obtaining evidence. Similar amendments instructing the courts to act in support of arbitrations have been made to the CPC and the Civil Procedure Code.

Other important amendments were introduced by Federal Law No. 409-FZ to Articles 33 and 225.1 of the CPC with respect to the arbitrability of corporate disputes. These changes aim to clarify certain issues that have previously lacked uniform regulation and to provide safeguards against existing abuses of arbitration proceedings in the corporate sphere.

Lawmakers have approached the issue of the arbitrability of corporate disputes on a case-by-case basis. As a general rule, it is possible to refer corporate disputes to an arbitration court; however, parties may only refer them to an arbitration administered by an arbitral institution, and not to ad hoc arbitration. A number of disputes are expressly declared non-arbitrable. For example, the following disputes cannot be referred to arbitration:

  1. disputes to challenge non-regulatory legal acts, actions and decisions of public authorities (and quasi-public bodies that have certain authorities), and the activities of notaries to certify transactions involving participatory interests;
  2. disputes over the convocation of a general meeting of participants of a corporation;
  3. disputes concerning the expulsion of participants of legal entities;
  4. disputes concerning the activities of strategic business entities (i.e., entities essential to ensure national defence and security); and
  5. disputes related to the acquisition and purchase of shares by a joint-stock company and the acquisition of more than 30 per cent of the shares of a public joint-stock company.

Other types of disputes declared to be non-arbitrable by the amendments to the CPC and the Civil Procedure Code include:

  1. disputes arising out of relations regulated by the Russian laws on privatisation of state-owned or municipal property, or by Russian laws on government or municipal procurement contracts for the purchase of goods, works or services;
  2. disputes relating to personal injury;
  3. disputes relating to environmental damage; and
  4. disputes arising out of family, inheritance or employment relations.

The lists of non-arbitrable disputes under both Codes are non-exhaustive and could be supplemented by other categories of disputes established in other federal laws.

In 2018, the Law on Arbitration was amended by Federal Law No. 531-FZ. The amendments, which became effective on 29 March 2019, affect, inter alia, ad hoc arbitrations having their seat in Russia. Under the amendments:

  1. any parties that have not obtained a state authorisation to act as permanent arbitration institutions are prohibited from performing functions related to the administration of ad hoc arbitration in Russia, including the appointment of arbitrators, and making decisions on the challenge or termination of the mandate of arbitrators; and
  2. in disputes arising out of procurement contracts in which the purchasers of the goods or services are state-owned entities or companies whose interest exceeds 50 per cent may now be resolved only through arbitration procedures administered by permanent arbitration institutions. (The contracts in question are distinguished from public procurement contracts, whose non-arbitrability is discussed below.)

Other significant amendments to the legislation include the following.

The form of an arbitration agreement

For international arbitration, the revised Article 7 of the ICA Law in essence adopts 2006 UNCITRAL Model Law Option 1. An agreement must be in writing, but this requirement is met if the content is recorded in any form that makes it accessible in the future, including by way of an exchange of electronic communications. The amended provisions also contain:

  1. a presumption in favour of the validity and enforceability of an arbitration agreement;
  2. an extension of the arbitration clause in a contract to disputes concerning the validity and enforceability and termination of a contract, as well as to disputes concerning transactions entered into in performance of the contract, unless the parties have otherwise agreed; and
  3. an automatic extension of the arbitration clause in a contract to the assignees of the contractual rights and obligations while it also continues to apply as between the assignor and the other party to the contract.

Opt-out requirement

Russian law requires parties to expressly agree on certain terms and conditions. A reference to the arbitration rules will be deemed insufficient to evidence the parties' agreement. Such an agreement of the parties will only be valid if they agree to institution-administered arbitration and not ad hoc arbitration. These terms and conditions are:

  1. waiver of recourse to state courts:
    • to appoint an arbitrator in the event that the procedure that the parties agreed to use for the appointment fails;
    • to decide on a challenge regarding an arbitrator or applications for dismissal; or
    • to challenge the tribunal's decision on jurisdiction; and
  • waiver of the right to challenge the award in set aside proceedings (the finality of the award): the parties may agree that the arbitral award will be final, in which case the award may not be challenged. This transpires from the language of the relevant provisions that if the parties expressly agree to the finality of the award, they may not apply to court to set the award aside even on public policy or non-arbitrability grounds.

Preliminary interim measures

Upon the parties' agreement, a permanent arbitration institution is entitled to issue preliminary interim measures before the tribunal is set up in a case.

Term for a court decision on the enforcement of an award

In an attempt to expedite the enforcement of an arbitral award, revised laws require the court to rule on an application to recognise and enforce the award within one month instead of the previous term of three months. The decision of the first instance court is immediately enforceable, unless the cassation instance court decides to stay the enforcement on an application of the respondent.

Remedying an award

Russian law permits a court to stay set aside proceedings and to transmit an award back to an arbitral tribunal if the court identifies certain procedural defects that the tribunal can remedy.

Declaratory award

A procedure is set out for dealing with the recognition of foreign arbitral awards that do not require enforcement (such as a declaratory award). The law places the burden on the losing party to file an objection for recognition in Russia of such award on any of the grounds provided by law for an objection to the enforcement of an award.

In summary, the amendments to the applicable legislation are intended to eliminate the previous uncertainty and ambiguity of court practice on various issues related to arbitration proceedings. Special rules and restrictions were set by lawmakers with an intention to eliminate abuses in the area of domestic arbitration and to facilitate the arbitral procedure. On the other hand, the amendments clearly demonstrate the legislator's intention to limit the scope of ad hoc arbitration in Russia and exercise more control over such arbitration by allowing only permanent arbitration institutions to perform functions related to the administration of ad hoc arbitration.

ii Arbitration developments in the local courts

Use of model arbitration clauses

The year in review was marked with contradictory positions of the Russian courts regarding the enforceability of arbitration agreements containing a certain model arbitration clause, in particular the arbitration clause recommended by the ICC. In at least two cases considered in 2018, the courts decided on the non-enforceability of the ICC model clause, arguing in particular that the arbitration agreements in question, while referring to the ICC Arbitration Rules, did not specify the arbitration institution that would consider the case. It is worth noting that in the past, as a general rule, Russian courts have not refused the enforcement of arbitral awards made on the basis of arbitration agreements containing the ICC model clause.

The above recent precedents created uncertainty as to whether parties still may use the modal arbitration clauses recommended by well-known and recognised international arbitration centres without the risk of such clauses being found defective by the Russian courts. Apparently in reply to concerns expressed by both Russian and international arbitration communities, the Russian Federation Supreme Court clarified the situation regarding model clauses. In its review of court practices relating to the assisting and supervising of domestic and international commercial arbitration dated 27 December 2018, the Presidium of the Supreme Court pointed out that the parties' arbitration agreement, if it corresponds to the agreement recommended by the arbitration institution chosen by the parties, is enforceable. The Presidium of the Supreme Court also emphasised that, under Russian arbitration law, when interpreting the arbitration agreement, any doubt shall be interpreted in favour of its validity and enforceability.

Alternative dispute resolution clauses

For a number of years, the Russian courts did not demonstrate a uniform approach to the issue of how alternative dispute resolution clauses should be treated: that is, whether an arbitration clause was enforceable in circumstances where the parties' agreement of the same provided for each party's right to refer the dispute to a state court and, in particular, in the situation where only one party was granted the right to choose between arbitration and litigation. The dominant positions to date far were confirmed by the Supreme Court in the above-mentioned review of court practice dated 27 December 2018. First, the Presidium of the Supreme Court agreed that an alternative dispute resolution clause granting a claimant the right to refer a dispute to arbitration or litigation is not contrary to Russian law, as it does not put one of the parties in a more favourable position and thus is not asymmetrical. Second, if a clause contains the parties' agreement to arbitrate but at the same time grants one of the parties the right to refer a dispute to a state court, then the other party should be deemed as having the same right to choose between arbitration and litigation.

Non-arbitrability of disputes with a public element

In recent cases, the courts have continued to address the issue of public law elements in the civil law relationship, which elements may make the underlying contracts non-arbitrable. In particular, the courts see such elements in public procurement contracts as regulated by Federal Law No. 44-FZ dated 22 March 2013. Although the law does not prohibit parties to a public procurement contract from arbitrating, the courts take the position that the transparency and state control required by law with respect to the execution and performance of such contracts cannot be achieved if the respective disputes are arbitrated, given that the arbitral proceedings would be confidential and the arbitral award would not be subject to a review on its merits.9

Disputes arising out of concession agreements

The issue of the arbitrability of concession agreements had been addressed by Russian courts before the arbitration reform described above. Article 17 of the Law on Concession Agreements provides that disputes between a concessor and a concessionary shall be resolved by state courts, state commercial courts and arbitral tribunals of the Russian Federation. The wording of Article 17 fails to specify whether it includes only domestic arbitration, or also encompasses international commercial arbitration with a seat in Russia. In a case considered in 2013 and 2014, the state courts affirmed that the resolution of a dispute arising out of a concession agreement by an international commercial arbitration sited in Russia complies with the above provisions of the Law.10

In a recent case, the issue of the arbitrability of concession agreements was raised again. In this case, the concession agreement contained an arbitration clause providing for the resolution of disputes at the ICAC.11 However, the court of first instance refused to stay the proceedings and ruled on the merits of the case. The court considered that the dispute fell within the public law domain and was therefore non-arbitrable.

The appeal court disagreed with this position. Overturning the ruling, the appeal court stressed that the sole fact that the state was the party to a civil law relationship did not point towards the public nature of the dispute. In the court's opinion, the subject-matter of the dispute – alleged non-payment under the concession agreement – affirms the private law interest of the state in this case.

The appellate court further pointed out that the reliance of the first instance court on the non-arbitrability of public procurement contacts was without merit. It indicated that the legislation on public procurement contracts is not applicable to concession agreements as they are regulated by a special law. In addition, in the court's opinion, the law on concession agreements, unlike the legislation governing public procurement contacts, grants parties broad discretion to negotiate the terms of agreements, including the dispute resolution method. The cassation court agreed with the conclusions made by the appeal court in this case.

iii Investor–state disputes

Russia has entered into a number of bilateral investment treaties (BITs) that in general are similar in content, provide for the fair and equitable treatment of investments in signatory countries, and prohibit nationalisation or expropriation (or measures having the effect of nationalisation or expropriation) without compensation. The BITs typically provide for arbitration under the UNCITRAL Arbitration Rules, or before the Arbitration Institute of the Stockholm Chamber of Commerce. Russia signed the ICSID Convention on 16 June 1992, but has not yet ratified it. None of the investment treaty arbitrations to which Russia is a party, therefore, have taken place before the ICSID.

A number of arbitrations against Russia were initiated in 2015 by Ukrainian banks and companies seeking the recovery of investments lost in Crimea under the BIT between Russia and Ukraine.

These cases were lodged with the Permanent Court of Arbitration in The Hague. The claims are premised on the theory that Russia has assumed obligations in respect of Ukrainian-owned investments in Crimea by virtue of its annexation and de facto control of the region. Russia is refusing to participate in any of the Crimea-related cases on the basis that there is no jurisdiction for them under the Ukraine–Russia BIT. As far as is known, in 2018, in at least two of these cases arbitrated under the UNCITRAL Rules the arbitral tribunals made awards granting substantial compensation to the claimants, including the Ukrainian state-owned bank Oschadbank.

Under the same BIT between Russia and Ukraine, the UNCITRAL arbitration was initiated by the Russian company Tatneft against Ukraine. By an arbitral award dated 29 July 2014, the tribunal awarded US$112 million in compensation to Tatneft for investments lost in Ukraine. The award was recognised and enforced by the Russian court in March 2019.12

III OUTLOOK AND CONCLUSIONS

2018 was marked by the results of the reform of the Russian legislation regarding arbitration. The new legislation had been conceived as a significant move forward in the development of arbitration in Russia that would reflect the current trends in international arbitration, and be the basis for the improvement and unification of law practices in the sphere of arbitration proceedings. Unfortunately, it became obvious at the implementation stage that the emphasis of the reform had shifted to the reinforcement of state control over arbitration, and the complications that have arisen when arbitral institutions have sought to obtain state authorisations can be seen as the result of the state's decision to constrain the development of arbitration in Russia. It remains to be seen whether the new legislation on arbitration will make Russia a more attractive arbitration option for businesses and prevent the use of arbitration for abusive purposes.


Footnotes

1 Mikhail Ivanov is a partner at Dentons.

2 Russian Federation Law No. 5338-1 on International Commercial Arbitration dated 7 July 1993.

3 Federal Law No. 102-FZ on Arbitration Courts in the Russian Federation dated 24 July 2002.

4 The amended ICA Law provides for an opportunity to opt out of such proceedings before the state court by parties' agreement.

5 The list must contain at least 30 recommended arbitrators with at least half of the arbitrators on the list having more than 10 years of experience of settling disputes as an arbitrator or a judge, and at least one-third of the arbitrators having a relevant postgraduate degree obtained in Russia. The same arbitrator can appear on the lists of not more than three arbitral institutions.

6 Official site of the ICAC, available at http://mkas.tpprf.ru/en/.

7 Mikhail Galperin, 'Arbitration Reform. Post Scriptum', Zakon, No. 9, 2017.

9 Case No. A40-49560/2017, available at https://kad.arbitr.ru/.

10 Case No. A56-45107/2013, available at https://kad.arbitr.ru/.

11 Case No. A40-93716/2017, available at https://kad.arbitr.ru/.

12 Case No. A63-15521/2018, available at https://kad.arbitr.ru/.