STATE COURTS AND ARBITRAL TRIBUNALS RUSSIA S PERSPECTIVE LEARN TO LOVE THEM

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STATE COURTS AND ARBITRAL TRIBUNALS RUSSIA S PERSPECTIVE LEARN TO LOVE THEM VICTOR DUMLER DUMLER AND PARTNERS St. Petersburg 5 th DIS Baltic Arbitration Days 2016 2 3 June 2016 Riga, Latvia

Is Russia arbitration-friendly? About 500 active arbitral institutions (c. 2 500 in total) About 4 000 court cases per year in re setting aside and enforcement About 10 % annual growth About 80 % enforced

All this is about to change soon From unlimited freedom to a license to arbitrate

Trend 1 Court s Oppose to Pocket (Affiliated) Arbitral Institutions Case law concept of objective impartiality : affiliation between a party to arbitration and organization (or its member), which created the arbitral institution, renders a lack of objective impartiality (independence) 2011 Sberbank case 2012 Lukoil case 2013 Gazprom case De facto block for operation of arbitration institutions acting under various business associations 2014 Constitutional Court: Affiliated does not necessarily mean prejudiced 2015 Supreme Court: affiliation with the institution does not as such render a lack of impartiality of a specific tribunal

Trend 2 - Increasing Control over Establishment and Operation of Arbitral Institutions All permanent arbitral institutions:* Can be established by noncommercial organizations only Subject to a special permission by the Federal Government based on a recommendation of a special advisory board (2/3 of which representing private sector). Arbitrations rules are subject to deposition (de-facto registration) with the Ministry of Justice Shall comply with a set of rather detailed and mandatory requirements (re procedure, recommended list of arbitrators etc.) If an arbitral institution fails to meet the obligatory requirements, the Ministry of Justice will have the right to: (i) issue a warning; and (ii) apply to state court for compulsory liquidation *in force starting from September 2016

Trend 3 Increasing Courts Involvement and Assistance in Arbitration Proceedings Competent court will: Serve as an appointing authority when a party, co-arbitrators and, in certain cases, arbitral institution fail to appoint the arbitrator Hear a challenge of an arbitrator Hear a challenge of a preliminary ruling on jurisdiction Have the right to suspend annulment or enforcement proceedings and give the arbitral tribunal an opportunity to rectify possible grounds for refusal or annulment Have the right to order a disclosure of evidence under a request of a party or tribunal

Trend 4 A Growing Appetite to Grant Interim Measures New law reinforces the court s authority to grant interim measures in support of pending and future arbitration proceedings Recent case law shows that courts: Display a growing appetite to grant interim measures: And sometimes even get carried away: Commercial court grants a freezing injunction in support of LCIA arbitration LLC Telekom Povolzhye v OJSC, Bolaro Holdings Limited, no. A55-22/2016, 12 January 2016 Commercial court grants interim measures in parallel court proceedings on the merits factually blocking pending arbitration - LLC Autoproject v Sberbank and Independent Arbitration Chamber, no A53-23688/2015, 6 October 2015

Trend 5 Increasing Flexibility (Autonomy) for Parties to Arbitration Proceedings Parties will have the right by way of direct agreement *: Exclude court s assistance as an appointing authority Exclude court s authority to hear a challenge of arbitrators Exclude court s authority to hear a challenge of a preliminary ruling on jurisdiction Exclude court s authority to hear an application for annulment of award * not applicable to ad hoc arbitrations

Trend 6 Arbitrability: More Certainty and Expansion The list of non-arbitrable disputes Real estate disputes ARE ARBITRABLE Corporate disputes ARE GENERALLY ARBITRABLE Corporate disputes with an impact on a greater number of parties ARE CONDITIONALLY ARBITRABLE Corporate disputes with a public element and a certain list of related disputes ARE NOT ARBITRABLE No ad hoc arbitration for corporate disputes

Refusal for Recognition and Enforcement of Foreign Judgments and Arbitral Awards Procedural Violations: Notification, Going Beyond Scope, Composition of Tribunal (approx.48%) Contradiction to Public Policy (approx.41%) Invalidity of Arbitration Agreement/Clause (approx.11%)

Trend 7 Changes to Setting Aside and Enforcement Domestic arbitration: grounds for annulment to bring in line with UNCITRAL Model Law Parties can agree on the finality of the award in international arbitration Foreign declaratory arbitral awards are recognized without court proceedings, unless challenged by an interested party Procurator (state attorney) will have a limited right to challenge a Russian arbitral award in court if such award concerns interests of Russian Federation, its federal units and municipalities whose were not parties to arbitral proceedings Changes in public registers upon court s review only Quick vs good: reduced term to consider application by court 1 (one) month!

Temperature of Public Policy Approach New law perfected the test to public policy excluding basic principles of Russian law No merits review when assessing public policy compliance Application of substantive or procedural rules unknown to Russian law Casual willingness to review on the merits and application of Surprise Decision Doctrine Torpedo claims: arbitral award shall not contradict a judgment by Russian court Liquidated damages and penalties unless clearly excessive

Recent Lessons: Court s Approach Can Be Unpredictable Be careful with anything that may even remotely refer to government s money state owned companies, publicly funded works, concessions Make sure all corporate approvals by a Russian counterparty are obtained Authority to conclude an arbitration agreement must be expressly articulated in the power of attorney Avoid optional and asymmetrical arbitration clauses Unclear arbitration clauses continue to cause problems Commencement of insolvency proceedings may frustrate ongoing arbitration

THANK YOU! DUMLER AND PARTNERS Golitsyn House, Office 89 13 th Lane 6-8, Vasilyevsky Island, St. Petersburg, Russia info@dumler.ru tel.:+ 7.812.386.37.19 www.dumler.ru