Arbitration in Russia

Arbitration in Russia —

Proceedings at the International Commercial Arbitration Court at the Chamber of Commerce and Industry 

In Russia, the word "arbitration" is used to refer to two completely different concepts that should be distinguished:

·       State arbitration courts administer justice in the field of entrepreneurial and other economic activities. They are characterized by a strict hierarchy and defined jurisdiction, and their decisions can be reviewed by higher courts through appeals, cassation, or supervisory review[1];

·       Alongside the state courts, there are permanently operating non-state arbitration (arbitral) institution[2]. They consider civil-law disputes related to international economic activities. Their decisions are final and cannot be challenged on the merits, and proceedings in these institutions involve the presence of a foreign element in the dispute.

Existing arbitration institutions and the legal basis for their activities

Arbitral tribunals are established by non-profit organizations. In order for such a tribunal to have the authority to consider disputes, it must obtain permanent accreditation from the Ministry of Justice of the Russian Federation[3]. 

Currently, in Russia, there are several recognized and most authoritative arbitration centers, including:

·      The International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC at the RF CCI);

·      The Maritime Arbitration Commission at the RF CCI;

·      The Russian Arbitration Center at the Russian Institute of Modern Arbitration;

·      The Arbitration Center at the Russian Union of Industrialists and Entrepreneurs (for corporate and investment disputes).

The procedure for applying to the arbitration center and the arbitration process will be discussed below using the example of the ICAC at the RF CCI — the oldest and most reputable arbitration institution in Russia (hereinafter referred to as ICAC).

Jurisdiction of the ICAC

By agreement of the parties, disputes may be submitted to the arbitration institution if at least one of the following conditions is met[4]:

·       The dispute arises within the framework of foreign trade or other international economic relations;

·       At least one party conducts business abroad;

·       The main part of the obligations is to be performed overseas;

·       The subject of the dispute is closely connected with foreign territory;

·       The dispute concerns foreign investments in Russia or Russian investments abroad.

However, there are categories of disputes involving foreign parties for which Russian law grants state courts exclusive jurisdiction (disputes over Russian real estate, intellectual property, etc.)[5].

Applicable Law

The arbitral tribunal resolves the dispute in accordance with the law specified by the parties in the contract as applicable to the substance of the dispute (i.e., the parties' choice of applicable law)[6]. In the absence of any such indication by the parties, the tribunal shall be guided by general rules for determining the applicable law[7]. 

Limitation Period

The statute of limitations is the period within which a claim must be filed to protect a violated right, and it depends on the applicable law and the legal nature of the relationships from which the dispute arises. For example, under the Civil Code of the Russian Federation, the general limitation period is 3 years, but there are specific periods depending on the type of dispute[8]. In cases where the provisions of national law cannot be applied, arbitrators may be guided by general principles and rules of private law.

Pre-trial Procedure

As a rule, a condition of mandatory pre-trial settlement is included by the parties in the contract and specifies certain response deadlines, the form of sending the claim (e.g., registered letter), and other conditions established by the parties. If the parties have stipulated that the pre-trial procedure is mandatory, ignoring it may lead to the dismissal of the claim. However, even if the pre-trial procedure is non-mandatory, evidence of attempts to comply with it can contribute to the formation of a good-faith criterion in the eyes of arbitrators (or tribunal judges).

Formation of the Arbitration Panel

Unless the parties agree otherwise, the arbitration panel is formed of three arbitrators. However, considering the nature and complexity of the dispute, the value of the claim, and other circumstances, the Presidium of the ICAC (hereinafter referred to as the "Presidium") has the right, at its own discretion, to decide to consider the case with a sole arbitrator[9]. 

When forming a panel of arbitrators, each party selects one arbitrator, and the Chairman of the panel is appointed by the Presidium from the approved list of arbitrators. If a party fails to appoint an arbitrator within the specified timeframe or files a relevant petition, the appointment may be made by the Presidium itself. In all cases, the appointment is made exclusively from the ICAC's list of arbitrators. Both the claimant and the respondent are also obliged to designate alternate arbitrators. If no such choice is made, the Presidium appoints them independently.

Documents to be Submitted to the Court

The list of documents to be provided depends on the party’s role in the dispute but is governed by general principles of judicial proceedings. First and foremost, only those materials that directly confirm the existence of a legal relationship with the counterparty, the essence of the claims or objections, the violation of obligations, or the absence thereof should be submitted.

The documents must have the proper form (signatures, seals, requisites) and must meet the translation requirements (if the original is in a foreign language). Materials should clearly outline the sequence of events: from the conclusion of the contract to the emergence of disagreements.

Thus, the following documents (not an exhaustive list) may be presented:

·       The contract (the main document regulating the parties’ relations);

·       Appendices, supplementary agreements, specifications (if they modify or supplement the contract terms);

·       Primary documents confirming the fulfillment/non-fulfillment of obligations (acts, waybills, payment orders, invoices);

·       Correspondence on disputed issues (letters, electronic messages, negotiation protocols);

·       Claims and responses to them (if a pre-trial procedure is provided);

·       Expert reports or calculations (if required to substantiate the amount of claims or damages).

It is important to understand: the more complete the package of documents you can provide, the better your representative in court will be able to substantiate your position, which significantly increases the likelihood of a favorable decision.

All documents related to arbitration proceedings at the ICAC must be submitted by the parties in six copies of the same completeness, and in the case of consideration of the dispute by a sole arbitrator, in four copies — with the corresponding increase in the number of copies if more than two parties participate in the dispute, unless otherwise specified by the Responsible Secretary of the arbitral tribunal if necessary[10]. 

Procedure for Filing with the ICAC

If the provisions regarding the pre-trial procedure are followed, and the documents are prepared and submitted to the ICAC, the case is accepted for consideration (respectively, the first stage is applying to the arbitral tribunal with a claim statement). The Secretariat notifies the respondent of the claim filing and sends them a copy of the claim and the attached documents after they have been submitted in the required number of copies and the full advance arbitration and registration fee has been paid.

The respondent has the right to submit a response to the claim within a period not exceeding 30 days from the date of receipt, which may be extended in the presence of justified reasons[11].  It is necessary to comply with all formal requirements for the content and formatting of the claim statement as set out in the ICAC Rules to avoid the rejection of the claim and, consequently, delays in resolving the dispute[12]. The claim statement, signed by the claimant or their authorized representative, must contain mandatory details, in particular, the subject and grounds of the claim, properly formulated demands, the amount of the claim, and other provisions provided by the ICAC Regulations.

Cost of submitting a claim to the ICAC

The ICAC Regulations on arbitration costs establish the following main fees:

·       Registration fee, equivalent to 1,000 US dollars for international arbitration and 10,000 rubles for domestic disputes[13];

·       Security fee, if a request for the granting of interim measures is made[14];

·       The arbitration fee for arbitration of international commercial or corporate disputes is calculated in US dollars according to the following scale[15]: 

The arbitration fee for internal disputes is calculated in Russian rubles according to a separate scale. The amount of the claim is determined based on the category of the dispute and, as a general rule, depends on the amount of the debt or the value of the disputed property (or other subject matter of the legal relationship).

According to the Regulation on Arbitration Costs, the party in whose favor a decision is rendered may request the other party to reimburse the reasonable costs incurred by them in connection with the arbitration proceedings, including expenses related to the payment of legal services[16].

Substantive Consideration

The main stage of arbitration proceedings is the hearing[17], during which the parties present their legal positions, introduce evidence, and participate in oral arguments. The hearing is conducted in the language chosen by the parties, and in the absence of an agreement — in Russian. The session is held in a closed (private) mode, with no access for outsiders. However, with the consent of the arbitration panel and both parties, other persons not involved in the case may be allowed to attend the hearing.

As in any judicial process, each party is obliged to prove the circumstances it refers to in support of its position. The arbitration has the right to request additional evidence, as well as to initiate expert examinations, summon witnesses, or request information from third parties on its own initiative.

Authorized persons of the ICAC take measures to ensure that the case is resolved within a period of no more than 180 days from the formation of the arbitral tribunal. The Presidium may, if necessary, at the request of the arbitral tribunal or on its own initiative, extend the period for resolving the case. After the hearing, a protocol is drawn up, which the parties have the right to review.

Enforcement and Implementation of ICAC Decisions

An arbitral award becomes binding from the date it is issued and must be voluntarily complied with by the parties within the period specified in the award. If no other deadline for compliance is specified in the arbitral award, it is subject to immediate enforcement. If the award is not voluntarily complied with within the specified period, it shall be enforced in accordance with applicable legislation and international treaties[18].

If the debtor is located in Russia, it is sufficient to apply to the state arbitration court with a request for the issuance of an enforcement order (writ of execution), which is considered by a judge single-handedly within a period not exceeding one month from the date of receipt of the application by the respective court. After obtaining the enforcement order, enforcement can be carried out through the general procedure—involving bailiffs or directly through the bank.

Regarding the enforcement of an ICAC decision issued in favor of a foreign counterparty from an "unfriendly country," it should be noted that if the decision involves legal relations related to financial obligations (such as loans, borrowings, financial instruments), it is likely that approval from the Russian Government Commission will be required[19].

If the ICAC decision needs to be enforced abroad, the 1958 New York Convention applies [20]. In case of non-voluntary enforcement, it is necessary to apply to the court of the country where enforcement of the decision is planned, with a petition for recognition and enforcement of the ICAC award.

Representation in ICAC: who can conduct the case and what requirements are imposed

In the ICAC, parties have the right to conduct the case themselves or through duly authorized representatives[21]. The authority of the representative must be documented in writing in the form of a power of attorney, which should specify the scope of authority. If the power of attorney is issued by a foreign person, additional requirements apply:

·       it must be legalized (apostilled);

·       a notarized translation into Russian must be attached.

How we can help

The firm "Avakov Tarasov and Partners" is ready to provide services related to supporting arbitration proceedings at the ICAC at the RF Chamber of Commerce and Industry at all stages, including:

·       Preliminary case analysis and assessment of prospects;

·       Verification of documents related to the transaction involved in the dispute;

·       Checking compliance with pre-trial procedures and statutes of limitations in accordance with applicable law;

·       Developing a procedural strategy (active/passive defense or attack);

·       Ensuring procedural requirements when submitting documents, paying fees, etc.;

·       Preparing documents to build a strong evidentiary basis;

·       Providing representation;

·       Assisting in collecting and systematizing evidence;

·       Selecting arbitrators based on the specifics of the case;

·       Representing your interests at all stages of the process;

·       Monitoring the enforcement of the decision.

[1] Articles 1 and 4 of the Federal Constitutional Law No. 1-FKZ of April 28, 1995, "On Arbitration Courts in the Russian Federation."

[2] Article 1 of the Federal Law No. 382-FZ dated December 29, 2015, "On Arbitration (Arbitration Proceedings) in the Russian Federation."

[3] Paragraph 1 of Article 44 of Federal Law No. 382-FZ dated December 29, 2015, "On Arbitration (Arbitration Proceedings) in the Russian Federation."

[4] Paragraph 1 of § 2 of the Regulations on the organizational foundations of the activities of the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (Appendix 1 to the order of the RF CCI dated January 11, 2017, No. 6).

[5] Article 248 of the Arbitration Procedural Code of the Russian Federation.

[6] Paragraph 1 of Article 28 of the Law of the Russian Federation No. 5338-1 dated July 7, 1993, "On International Commercial Arbitration."

[7] Paragraph 2 of Article 28 of the Law of the Russian Federation No. 5338-1 dated July 7, 1993, "On International Commercial Arbitration."

[8] Articles 196 and 197 of the Civil Code of the Russian Federation.

[9] Paragraph 2 of § 16 of the "Rules of Arbitration for International Commercial Disputes" (Appendix 2 to the order of the RF CCI dated January 11, 2017, No. 6).

[10] § 9, 10 of the "Rules of Arbitration for International Commercial Disputes" (Appendix 2 to the order of the RF CCI dated January 11, 2017, No. 6).

[11] § 2, 6 of the "Rules of Arbitration for International Commercial Disputes" (Appendix 2 to the order of the RF CCI dated January 11, 2017, No. 6).

[12] § 3 of the "Rules of Arbitration for International Commercial Disputes" (Appendix 2 to the order of the RF CCI dated January 11, 2017, No. 6).

[13] § 2 of the Regulations on Arbitration Costs (Appendix 6 to the order of the RF CCI dated January 11, 2017, No. 6).

[14] § 3 of the Regulations on Arbitration Costs (Appendix 6 to the order of the RF CCI dated January 11, 2017, No. 6).

[15] § 5 of the Regulations on Arbitration Costs (Appendix 6 to the order of the RF CCI dated January 11, 2017, No. 6).

[16] § 11 of the Regulations on Arbitration Costs (Appendix 6 to the order of the RF CCI dated January 11, 2017, No. 6).

[17] Chapter 6 of the "Rules of Arbitration for International Commercial Disputes" (Appendix 2 to the order of the RF CCI dated January 11, 2017, No. 6).

[18] § 42 of the "Rules of Arbitration for International Commercial Disputes" (Appendix 2 to the order of the RF CCI dated January 11, 2017, No. 6).

[19] Decree of the President of the Russian Federation No. 95 dated March 5, 2022.

[20] The 1958 New York Convention "On the Recognition and Enforcement of Foreign Arbitral Awards."

[21] § 26 of the "Rules of Arbitration for International Commercial Disputes" (Appendix 2 to the order of the RF CCI dated January 11, 2017, No. 6).